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PROBLEMS 



IN 



POLITICAL ECONOMY 



By 
WILLIAM GRAHAM SUMNER 

Professor of Political and Social Science in Yale College 









8b^ / 






NEW YORK 
HENRY HOLT AND COMPANY 

1884 



Copyright 

1883, 

By W. G. Sumner. 






^ 5 
^^i 



Press of Tultle, Morehquse & Taylor,"New Haven, Coun. 



CONTENTS. 



Preface, _--...-»v 

List of Books, _ - - - * « vii 

1. General Definitions, _ - - . ^ i 

2. Elementary Principles, - - - - 9 

3. Population, - - - - - - 23 

4. Land and Rent, - - - _ .. 26 

5. Wages, - - - - -.. -31 

6. Consumption, __...- 50 

7. Money, Currency, and Banking, - ~ - 58 

8. International Exchanges, - . . ._ 83 

9. Economic Policy: Socialism, Adjustment of Rights, 

Etc., - - - - - . 89 

10. Economic Policy: Public Finance, - - - 105 

11. Economic Policy: Taxation, . .. ^ 108 

12. Economic Policy: Protectionism, ^ - - 112 



PREFACE 



When I began to make this collection of problems I intended to 
make only a small pamphlet for use in my own class-room. The 
enterprise has grown, however, until it has seemed better to make 
a book and publish it. Hence a few words of explanation are 
here needed. 

I have long used problems and fallacies as auxiliary to my 
other class-room work. The object of such exercises is to break 
up the routine of text-book recitations, to encourage wider study 
of scientific treatises, and to develop some independent power of 
thinking, and of appl; '.ag the principles which have been learned. 
In the present state ;f political economy it seems especially 
desirable to study subjects, and not text-books. These problems 
aie intended to bring forward the sujajects or topics which should 
be studied, and to guide the student to an investigation of them 
with the aid of the teacher, and by the use of the leading treatises 
in the science. The problems are, in their form, almost all " lead- 
ing," and eflfort has been made to put them in such a way that a 
student who has already studied an elementary text-book can 
deal with them. When- possible, they have been put in that form 
in which they present themselves in practice. My aim has been 
to limit the references as much as possible in number, and to con- 
centrate them on the following books: Rogers's Adam Smith, 
Mill's Principles, Jevons' Theory, Marshall's Economics of In- 
dustry, Cairnes's Principles, Walker's Political Economy, and 
Cossa's Guide. A " Loan Library of Political Economy" has 
been formed as a part of the scheme, from which each student can 
obtain a copy of each of the above books for use so long as he 
desires. I have found, however, that, if the problems were to 



yi PREFACE. 

have any range and variety, I must enlarge the range of the refer- 
ences far beyond my original intention. I give below a list of all 
the books to which reference is made under the problems. The 
library will contain these in numbers proportioned to their use- 
fulness. 

While I was at work on these problems Milnes' collection of 
2,000 questions and problems from English examination papers 
was published. I have to acknowledge my obligations to that 
collection. I have borrowed some problems from it; others I have 
adapted. They are marked by an M. with the number in Milnes' 
collection, thus : (M. 100). Many have been suggested to me by 
reading that collection. I have given credit whenever the sug- 
gestion was so close that I could specify the question in Milnes' 
collection which suggested mine. This was not always possible, 
and so the present general acknowledgment must cover the rest. 

The problems here given are of very unequal difficulty and im- 
portance. A primary classification is made by printing the num- 
bers of those which I should reserve for examination at a later 
stage of study with thin faced numerals. 

I am indebted to Prof. H. W. Farnam and Mr. Arthur Hadley 
for valuable aid and suggestions. 

W. G. S. 

Yale College, December, 1883. 



FULL TITLES OF BOOKS CITED. 



Accounts and Papers, Session [Parliament] 1868-9, vol. 35, (Pub- 
lic Finances since 1688). 
Baden-Powell, State Aid and State Interference. Chapman & 

Hall, 1882. 
Bagehot, Lombard Street. Scribner, Armstrong & Co., 1873. 
Banker's Magazine. New York. 
Brodrick, English Land and English Landlords. Cassel & Co., 

1881. 
Cairnes, Logical Method of Political Economy. Macmillan, 1875. 
Cairnes, Some Principles of Political Economy. Harpers. 
Cairnes, Essays in Political Economy, Theoretical and Applied. 

Macmillan, 1873. 
ChevdXiet, Economie Foliiique. Paris, 1866. 
Chevalier, On Gold (Translated). Appleton, 1859. 
Cossa, Guide to the Study of Political Economy (Translated). 

Macmillan, 1880. 
Crump, English Manual of Banking. Longmans, 1877. 
Cunningham, Growth of English Industry and Commerce. Cam- 
bridge, University Press, 1882, 
DeBroglie, Le Libre J^change et rinipot. Paris, 1879. 
DeLavelaye, Prfmitive Property (Translated). Macmillan, 1878. 
D,ictionnaire de VEconomie Politique. Guillaumin, 1854. 
Fawcett, Political Economy, 6th Ed. Macmillan, 1SS3. 
Fawcett, Pauperism. Macmillan, 1871. 
Fawcett, Free Trade and Protection. Macmillan, 1878. 
Ford, American Citizen's Manual. Putnam, 1883. 
Giffen, Essays in Finance. Geo. Bell & Sons, 1880. 
Gilbart, The Principles and Practice of Banking. Bell & Daldy, 
_ 1871. 



Vlll REFERENCES. 

Goschen, Theory of the Foreign Exchanges. E. Wilson, 1875. 

Grant, Recess Studies. Edmonston & Douglas, Edinburgh, 1870. 

Hankey, The Principles of Banking, Effingham Wilson, 1873. 

Hertzka, Wahriing tind Handel. Wien, 1876. 

Holyoake, History of Cooperation in England. Lippincott, 1875. 

Horton, Silver and Gold. R. Clarke & Co., 1876. 

Humboldt, Sphere and Duties of Government. London, 1854. 

Hamilton. National Debt of Great Britain. Carey, 1816, 

Jevrns, Theory of Political Economy. Macmiilan, 1871. 

Jevons, Money and the Mechanism of Exchange. Appleton, 1875. 

Jevons, The Coal Question. Macmiilan, 1866. 

Jevons, Methods of Social Reform. Macmiilan, 1883. 

Lalor, Cyclopedia of Political Science, etc. Rand, McNally & Co., 
1S82. 

Leroy-Beaulieu, Science des Finances. Guillaumin, 1877. 

Letourneau, Sociology (Translated). Chapman & Hall, 1881. 

Levi, History of British Commerce. Murray, 18S0. 

Macleod, Principles of Economical Philosophy. Longmans. 1872. 

Macleod, Dictionary of Political Econom3\ Longmans, 1863. 

Maine, Village Communities. Murra}-, 1871. 

Mann, Paper Money. Appleton, 1872. 

Marshall, Economics of Industry. Macmiilan, 1879. 

Martineau, History of England. Boston, 1865. 

McCulloch's Adam Smith. Longmans, 1838. 

Mill, Political Economy. Longmans, 1878. 

Mill, Logic. Harpers, 1870. 

Mill, Liberty. Longmans, 1865. 

Milnes, Problems in Political Economy. Sonnenschein, 1882. 

Molesworth, History of England, Chapman & Hall, 1S74. 

Mongredien, History of the Free Trade Movement in England. 
Cassell & Co. 

Mongredien, Wealth Creation. Cassell & Co., 1882, 

Price, Practical Political Economy. Kegan Paul & Co., 1878. 

Princeton Review, November, 1879, Bimetalism. 

Princeton Review, March, 1881, The Argument Against Protec- 
tive Taxes. 

Princeton Review, November, 1881, Sociology. 



REFERENCES. IX 

Princeton Review, November, 1882, Wages. 

Probyn, Systems of Land Tenure in Various Countries. Cassell 
&Co. 

Ricardo, Works, Edited by McCulloch. Murray, 1881. 

Richardson, H. A., National Banks. Harpers. 

Richardson, W. A., Public Debt and National Banking Laws of 
the United States. Washington, 1873. 

Rogers, History of Agriculture and Prices in England. Claren- 
don Press, 1866. 

Roscher, Political Economy (translated). Callaghan, 1878. 

Say, Rapport sur le Payement de rindemniie de Guerre, in his 
Translation of Goschen, Theorie des Changes. Guillaumin, 

1875. 
Seebohm, The English Village Community. Longmans, 1883. 
Seybert, Statistical Annals, Philadelphia, 1818. 
Seyd on Bullion and Foreign Exchanges. Effingham Wilson, 

186S. 
Sidgwick, Principles of Political Economy. Macttiillan, 1883. 
Smith, Adam, Wealth of Nations, edited by Rogers. Clarendon ■ 

Press, 1880. 
Smith, Adam, edited by McCulloch, see McCulloch. 
Soetbeer, Peterfnann's Mittheiluttgen, Ero'dnzungsheft, Nr. 3-7, 

Edelmetall-proJtiktion. Gotha, 1879. 
Spencer, Study of Sociology. Appleton, 1874. 
Spencer, Principles of Sociology. Ap'->leton, 1883. 
Spencer, Biology. Appleton. 1874. 
Spencer, Social Statics. Appleton, 1863. 

Spencer, Essays, Moral, Political and Esthetic. Appleton, 1872. 
Sumner, Life of Jackson. Houghton, Mifflin & Co., 1882. 
Sumner, Argument before the Tariff Commission, 1882. 
Sumner, History of Protection in the United States. Putnam. 
Sumner, What. Social Classes Owe to Each Other. Harpers, 1883. 
Sumner, see " Princeton Review." 
Thornton, On Labor. Macmillan, 1870. 
Walker, Political Economy. Holt, 1883. 
Walker, Money. Holt, 1878. 
Walker, Money, Trade and Industry. Holt, 1879. 



X REFERENCES. 

Walker, Land and its Rent. Little & Brown, 1883. 
Wallace, Russia. Holt, 1877. 

Walras, Ibllements d' ^conomie Politique Pure. Lausanne, 1874. 
Ward, Dynamic Sociology. Appleton, 1883. 
Wilson, The National Budget. Macmillan, 1882. 
Woolsey, Political Science ; or, The State. Scribner, Armstrong 
& Co., 1878. 



ECONOMIC PROBLEMS. 



• •»• 



1. 

GENERAL DEFINITIONS. 

1, Discuss the following definitions of political 
economy : It is the science of value. 

It is the science of exchanges. 

It is the science which treats of the production, 
exchange and distribution of wealth. 

Political economy, or economics, is the name 
of that body of knowledge which relates to 
wealth. 

Political economy is the science which investi- 
gates the laws of the material welfare of human 
societies. 

Cairnes, Logical Method, 57. 

2. Is political economy not a science (i) be- 
cause, as is alleged, it cannot predict economic 
phenomena; (2) because, as is alleged, it has not 
won a body of positive and ascertained results ? 
What is a science? or what is the essential con- 
dition that any discipline may become a science? 

Marshall, 2. 



2 ECONOMIC PROBLEMS. 

3. Sociology is the science of life in society. 
Political economy is that branch of sociology 
which treats of the industrial organization of 
society. Expand the notion and definition of 
sociology and explain what that conception of 
political economy is which is here presented. 

-4. Price says that it is silly to call political 
economy a science ; that supply and demand, the 
law of population, etc., are only familiar facts of 
intelligent observation. Per contra, he affirms 
that political economy is " the application of 
common sense to familiar processes. It explains 
their nature and manner of working. It analyzes 
and thinks out practices which are universal ex- 
cept when thwarted by artificial theory." — Criti- 
cise this view of political economy as antithetical 
to the notion of a science. What is it to think out 
a practice? What is a practice which would be 
universal, if not thwarted? What is an artificial 
theory ? How can a theory thwart a practice ? 

Price, 10-15. 

5. Wealth is any material good which satisfies 
a desire of man, and w^hich is not gratuitous. It 
is used as a collective term, for the general con- 
ception of such goods, and, when it describes the 
subject or aim of political economy, it carries 
with it the notion of abundance. — Criticise and 



GENERAL DEFINITIONS. 3 

correct this definition. Do jou include in your 
definition the following? Honesty, health, skill, 
" the moral, intellectual, and physical natures" of 
the people, a patent right, a copy-right, a bill of 
exchange, the voice of a singer, a good harbor, 
climate, and sunlight. Do you infer, for instance 
from Price's discussion, that economists need not 
continue the effort to formulate a satisfactory 
definition of wealth ? 

Price, 23-30. Marshall, 6. Sidgwick, Chap. III. 

Adam Smith, I., i, Rogers's note. 

6. If a census were taken of the wealth of the 
country ought the owners of land to return it at 
its market value? Is the land a part of the 
national wealth ? Ought the owners of govern- 
ment bonds to include them in the return? If 
they did so, and if the returns were added up, the 
national debt would be counted into the sum of 
the national wealth. Would that be right? If 
A sells to B a bale of cotton for $500 and B gives 
a promissory note for it, ought B to return the 
cotton and A the note ? If A has a certificate of 
stock in a railroad, ought the railroad officers to 
return the railroad and ought A to return the 
stock ? 

Adam Smith, I., 254, Rogers's note. 

7. " Because political economy confines itself 
to discovering the laws of wealth, it has, by some. 



4 ECONOMIC PROBLEMS. 

been called derisively, the gospel of mammon. 
In reply to this sneer it would be enough to say 
that, while wealth is not the sole interest of man- 
kind, perhaps not the highest interest, it is yet of 
vast concern, of vital concern to individuals and 
to communities. As such it deserves to be 
studied. Now, if it is to be studied at all, it will 
best be studied by itself." — Vindicate in detail 
this view of political economy and show the rela- 
tion of political economy to other interests. 

Walker, Pol. Ec, i, 2. 

8. If there should be a scarcity of houses in the 
city of Washington this winter, would that fact 
constitute a problem requiring the attention of 
the economists of the country? How does your 
answer bear on the sphere of political economy 
and the opinions of the professorial socialists ? 

9. It has been said that the free play of eco- 
nomic forces would produce, not the best con- 
ceivable, but the worst conceivable, state of 
society. Show the absurdity of this statement. 

10. What are economic forces? What are 
economic laws? Are economic laws subject to 
exceptions — like laws of grammar? Are eco- 
nomic laws like the ten commandments ? Are 
they like Acts of Congress? Are they like laws 



GENERAL DEFINITIONS. 5 

of physics? Can we "violate" them? What is 
the limit of what we can do with economic forces ? 
If economic laws are described as expressing a 
''tendency," what is meant? What objection is 
there to that description of them ? 

Marshall, 3. Cairnes, Logical Method, 18. 

Cairnes, Principles, 184. Mill's Logic, Book III., Chap, 10, §5. 

Cossa, 7. Sidgwick, 24. Spencer, Study of Sociology, 22. 

11. A writer who ridicules the notion of 
natural or scientific laws in political economy 
cites " property" as a proof that no such laws 
exist. Show the fallacy. 

12. Distinguish between the science and art 
of political economy ; between political economy 
and politics. 

Walker, Pol, Econ., 20-22. Cossa, 6, 11-13. 

13. Is it a valid distinction to say that the 
science of political economy investigates what is ; 
the art, what ought to be ? 

Sidgwick, 23-26, also 402. 

14. Does the art of political economy mean, 
or include, the art of getting rich, or the art of 
conducting business, or the art of speculation, or 
the art of investing capital in stocks, bonds, lands, 
etc., or the art of conducting the finances of a 
nation, or the art of legislating on trade, in- 



6 ECONOMIC PROBLEMS. 

dustry, and finance ? Give reasons for including 
or excluding each of these things. 

15. Is political economy a '* moral" science? 
If so, according to what classification of the 
sciences is it so classed ? and what is meant by so 
denominating it ? 

Cairnes, Logical Method, 31, 37. 

16. Is political economy a deductive or an in- 
ductive science ? What difference does it make 
which it is 

Cairnes, Logical Method, 60 fg. Sidgwick, Chap. III. 

17. Is imagination a force in political econ- 
omy? If so, give all the illustrations you can. 
Discuss delusion, fraud, falsehood, prejudice, 
habit, tradition, patriotism and affection, so far 
as you think that an economist ought to take 
account of them. 

Ought there to be any difference in a text- 
book of political economy for an English college 
and for a college in India? 

Walker, Polit. Econ., 23. 

18. If it is said: "Some people struggle to 
keep up false appearances of wealth and so ruin 
themselves," do you think that that is such an 
observation as an economist should take account 
of? If it is said: " Many people waste their capi- 



GENERAL DEFINITIONS. / 

tell by extravagant expenditure," do you think 
that that is an observation of which an economist 
should take account? 

19. Do you think, as a matter of fact, that 
most people actually distribute their incomes in 
their expenditure so as to get the maximum of 
utility for themselves, judging by such standards 
of utility as they would admit to be sound when 
discussing the question of what things are useful 
abstractly ? If there are many who do not do so, 
does that present a fact which the economist 
ought to take note of in his discussions? 

Jevons, Theory, 76, 130-134. 

20. Do you believe that there are crafty and 
able men who can **rig the market" and bull and 
bear prices more or less at their pleasure? Men- 
tion commodities with which this might be more 
possible than with others. Is it possible with 
stocks? If so, why? What should you say of 
such interferences on the whole and over a con- 
siderable period of time ? Is the popular opinion 
correct about the extent to which manipulation 
of the market is possible? 

Banker's Magazine, XXXVI., 308. 

21. Was it the fundamental doctrine of the 
mercaatile system that the precious metals are 



8 ECONOMIC PROBLEMS. 

wealth exclusively or preeminently? If not, 
what was the fundamental doctrine of that sys- 
tem, and how was the doctrine just mentioned 
derived from it? Describe the development of 
the system. 

Adam Smith, I., 15, Rogers's note ; II., 63, Rogers's note. 
Cossa, 119, fg. 

22. How was the colonial system a deduction 
from the mercantile system ? 

Adam Smith, II., 190-210. 

23. Who were the Physiocrats and what did 
they teach ? 

Cossa, 142. Art. Physiocrates in the Dictionnaire de VEc. Pol. 

24. Mention the leading English economists 
from Smith to J. S. Mill, giving dates and the 
chief contributions of each. 

Cossa, 161-182. Life of Smith prefaced to Rogers's Smith. 



L. 



II. 
ELEMENTARY PRINCIPLES. 

25. What is meant by a period of production? 
Show the great importance of observing the 
element of time in economic phenomena and 
correctly defining it in economic generalizations. 

Jevons, Theory, 220-228. 

26. What could supply and demand mean to 
Robinson Crusoe ? When, in history, did supply 
and demand begin to act ? 

Supply and demand, at their lowest terms, are / 
not a ratio, but a case of two simultaneous equa- -"^z 
tions between two variables, or, they are repre- 4 
sented by two curves which intersect. There 
are two persons and two commodities. — Prove 
this and show what errors must follow from treat- 
ing supply and demand as a simple ratio. 

How far can we analyze supply and demand? 

Is the equilibrium of supply and demand acci- 
dental, imperfect, arbitrary, contingent, moral, or 
mathematical? 

Jevons, Theory, Chap. IV. 

Jenkin in Grant's Recess Studies, 151-171. 

Princeton Review, November, 1S82, p. 249-50 



lO ECONOMIC PROBLEMS. 

27. Effort and satisfaction are the pulsations 
by which the isolated man maintains existence. 
So soon as society exists division of labor begins 
and exchange follows. The systole and diastole 
of supply and demand are the form which the 
pulsations of effort and satisfaction take for a man 
who lives in society. Hence supply and demand 
are constant and all-pervading relations in society, 
and demand the first and most careful study of 
the economist. 

Rights and obligations are the jurisprudential 
aspect of the relations of supply and demand. — 
Expand and criticise. 

28. The law of supply and demand, in a free 
market without reserve, is that they come to an 
equilibrium at the ratio of value which will clear 
the market. — Compare Mill's law of the equation 
of international value and criticise the law here 
stated. 

Mill. 358. 

29. What is the difference between supply 
and demand and reciprocal demand ? 

Mill, 358. Cairnes' Principles, 89. 

30. Value is a fact, not an opinion. It there- 
fore has conditions of time and place, and may 
vary from moment to moment or place to place 



ELEMENTARY PRINCIPLES. II 

if successive sales take place. — Expand, illustrate, 
and establish, or refute, this statement. 

31. " Value, economists are pretty much 
agreed, is a relation ; and, for the purposes of the 
present discussion, we may so take it." A few 
pages further on: ''Value is purchasing- power; 
power in exchange." What further analysis is nec- 
essar;,' to make these two definitions consistent? 

Walker, Money and Trade, 30,, 36. 

32. " Wheat is worth 24 francs the hectolitre. 
This fact has the character of a natural fact. 
This value of wheat, reckoned in silver, does not 
result either from the will of the seller, or the 
will of the buyer, or from an agreement between 
them." '' Wheat is worth 24 francs the hectolitre. 
This is a mathematical fact. The value of wheat 
in silver yesterday was 22 or 23 francs. A little 
while ago it was 231^ or 23^. It will shortly be 
2414; or 24^. But to-day, at this instant, it is 
24 francs, neither more nor less. This is a math- 
ematical fact and admits of mathematical expres- 
sion." — Explain and prove. 

Walras, 29, 30. 

33. H the supply of all commodities w^ere 
doubled or halved suddenly, would any changes 
in their relative value ensue or not? (M. 774.) 

Jevons, Theory, 142-155. 



12 ECONOMIC PROBLEMS. 

34. On the Black Friday of 1869 gold was 
sold on one side of the gold room for 160 when it 
was being sold on the other side for 135. Those 
on one side of the room knew a minute sooner 
than those on the other side that the Secretary 
of the Treasury had ordered five million dollars 
gold to be sold, .adding so much to the supply. — 
How does this illustrate the doctrine of value? 
Cf. question 30. 

35. Is either one of the following things com- 
mensurable ; if so, which? Cost, desire, utility, 
satisfaction. What is "cost" according to 
Cairnes ? 

Cairnes, Principles, 73-S7. 

36. Why does not skill enter into cost? Is 
the fact here analogous to the fact that the rent 
of land does not enter into the price of agricul- 
tural produce ? 

Cairnes, Principles, 76-80. 

37. Translate into English, /r/;ir de revient. 

38. It is commonly said that value, in the long 
run, conforms to ''cost of production." Jevons 
says: ** I hold labor to be essentially variable, so 
that its value must be determined by the value 



ELEMENTARY PRINCIPLES. I3 

of the produce, not the value of the produce by 
that of labor." " Labor once spent has no influ- 
ence on the future value of any article." He 
defines labor " all exertion of body or mind" by 
which we get products, and he says that it is in- 
commensurable. Cairnes defines "cost" as all 
onerous exertion and sacrifice necessary to get 
goods. Macleod denies that labor produces 
value. He says that value produces or calls out 
labor. Sidgwick objects to Cairnes's use of 
''cost" that Cairnes spoke of the proportion of 
cost of production, but that we cannot think of 
''anything being in proportion to an aggregate 
of incommensurables." Marshall recognizes two 
uses of cost of production, adopts Cairnes's 
notion, and proposes the term " expenses of pro- 
duction" for the outlay, to which, as he and 
others say, normal value must conform. — Is 
Sidgwick's objection valid? Compare the above 
views and say whether the two senses of cost of 
production should be recognized, or, if only one, 
which ? 

Mill, 274-277. Jevons, Theory, 159-160. 

Sidgwick, 201. Macleod, Econ. Philos., I., 331. 



39. Jevons says that " Labor once spent has 
no influence on the future value of any article." 
On the wages system, if the labor spent last 
week was paid for by capital then consumed by 



14 ECOx\0MIC PROBLEMS. 

the laborer, can value to be received ever have 
anv effect back upon labor expended? or value 
be made to conform to capital formerly laid out? 
If we say that we shall make a new adjustment, 
in the next period of production, if we fail to re- 
place our capital, will not the next period of 
production have all its own facts, circumstances 
and relations, and be, in fact, a new and inde- 
pendent problem? 

40. Cost of production is a comparison of 
ratios. Cost is incommensurable, but the subject 
of it compares the cost with the satisfaction 
obtained. This ratio he cannot measure. It 
could not be measured and compared for two 
men, but the first man can compare the cost to 
him and the satisfaction to him in one line with 
the cost to him and the satisfaction to him in 
another, and this is what is really essential and is 
really done so long as two or more lines are 
open. Hence cost of production redistributes 
labor and capital and acts on supply ; so ulti- 
mately on value. In no other way does it act on 
value, which is controlled by supply and demand 
only. — Criticise this doctrine. Suppose that no 
second line is open, and that the ratio of satisfac- 
tion to effort falls, as when a laborer advanced in 
life has to compete with a machine which lowers 
the price of his product, what happens then? and 



ELEMENTARY PRINCIPLES. 1 5, 

what becomes of the notion of cost of production 
as an ultimate regulator of value? What light 
does this last supposition throw on the last two 
questions ? 



41. **A11 other organs, therefore, jointly and 
individually, compete for blood with each organ, 
so that, though the welfare of each is indirectly 
bound up with that of the rest, yet, directly,, 
each is antagonistic to the rest." *' Evidently 
this process [of enlargement of an industry or 
development of a district whose products are in 
unusual demand] in each social organ, as in each 
individual organ, results from the tendency of 
the units to absorb all they can from the common 
stock of materials for sustentation ; and evidently 
the resulting competition, not between units 
simply, but between organs, causes in a society, 
as in a living body, high nutrition and growth of 
parts called into greatest activity by the require- 
ments of the rest." 

Explain the doctrine of the first sentence and 
show how it applies to society. What light is 
here thrown on competition as a mode of growth, 
and on the general laws of life of Avh.ich competi- 
tion is one phase ? 

Spencer's Principles of Sociology, I., 535-6, 



l6 ECONOMIC PROBLEMS. 

4r2. Criticise the expression "division of la- 
bor." Explain social organization. Show that 
division of labor is only a case of it. Show the 
power and utility of organization. What is 
proved in regard to the social and industrial 
utility of concord and peace? What is the law 
of the " Increasing Return?" 

Marshall. Chap. VII., p. 57. 



4:3. *'Are the following to be included in capi- 
tal? (i) the original powers of the laborer; (2) 
his acquired powers ; (3) the original properties 
of the soil; (4) improvements on land ; (5) credit; 
(6) unsold stock in the hands of a merchant ; (7) 
articles purchased but still in the consumer's 
hands." (M. 166.) 

Jevons, Theory, 245-253. Sidgwick, 120-141. 

44r. The savings of the United States have 
been estimated at 850 millions of dollars a year. 
What sort of things are these savings and where 
are they? (M. 177.) 

Price, 113-14. Marshall, 15. 

45. Capital is transmuted in every period of 
production. Prove this. Show its relation to 
^' risk," and to any sound doctrine of wages. 

Show that industry is limited by capital. 

Mill, 39-41, 44- 



ELEMENTARY PRINCIPLES. 1/ 

46. The socialists declare that capital is pro- 
duced (i) by accumulating the differences be- 
tween buying price and selling price, i. e. the 
profits of merchants, and (2) by accumulating the 
differences between product and capital dis- 
tributed to laborers. They regard the product 
as due entirely to labor, and therefore denounce 
the latter difference as an abstraction from the 
laborer of what belongs to him. They therefore 
construe the history of the last five hundred 
years as a period in which the middle class has 
developed itself by the accumulation of capital, 
(i. e. the plunder of the proletariat) and the crea- 
tion of a capitalist system of industry. They 
construe civil liberty as the license given by the 
state to the robbery mentioned, and denounce 
competition as the mode in which the robbery is 
accomplished. 

State what facts in the industrial history of the 
last five hundred years are here misconstrued, 
show the misconstruction, and put the facts in 
their true light. 

Give an outline of the history of capital. 
When did it begin to be? 

Describe the modern industrial system as com- 
pared with the system in England in the thir- 
teenth century. 

Cunningham, especially 139, 249. Seebohm. 

Adam Smith, I., 273, Rogers's note. Walker, Land, 188. 



i8 ECONOMIC PROBLEMS. 

47. Mention as many natural monopolies as 
you can. State when and why space, light, air, 
and water have value. Do honesty and truth 
have value? If so, why? Are natural monopo- 
lies beneficent or maleficent to man ? Illustrate. 



48. If fresh meat has hitherto been wasted in 
Australia and Buenos Ayres, and if refrigerator 
ships can be constructed which can carry that 
meat to Europe, what effects can 3^ou trace on 
the prices of certain commodities, on the distri- 
bution and increase of population, and on interna- 
tional competition in industry as likely to be 
produced ? 

Adam Smith, I., 245. 



49. What is a speculator? Is he a parasite on 
the commercial system? If he performs a ser- 
vice, what is it? Is it a correct definition to say 
that he is one who bets on variations in prices? 

Cairnes, Principles, 109. Adam Smith, II., 89 note, 199. 

Nation, VIL, 85. 



50. Can we ever become too rich ? Has the 
work to be done any limits? Is the work to be 
done a positive quantity ? Does it remain con- 
stant ? 

Cairnes, Principles, 256-7. 



ELEMENTARY PRINCIPLES. I9 

51. *'As the washing- of clothes is not a pro- 
ductive industry, and its cost is one of the 
charges of living, it is an object that it should 
occasion as little drain upon the pecuniary re- 
sources of the community as possible." 

Criticise the distinction between productive 
and unproductive labor. 



52. Would it be a good state of things if no 
man could be found who would black another 
man's shoes for less than a dollar ? Suppose, 
first, that all were proud and shiftless, and then 
make other suppositions. 

53. " Discuss the effects of the exportation of 
capital (i) from England, (2) from Ireland." (M. 
219.) 

5-4. Can you assign any meaning to ** over- 
production" in any case whatever. 

Jevons, Theory, 190. 

55. A cause of industrial depression was said 
to be ''that the power to consume has not kept 
pace with the power to produce. It is not the 
fault of the power of production, [i. e., it is not 
over production.] It is a fault on the other 
side." 



20 ECONOMIC PROBLEMS. 

If production should exceed consumption, what 
would become of the difference ? If consumption 
should exceed production, where would we get 
the difference ? 

Cairnes, Principles, 31-36. 

56. What are the economic objections to gamb- 
ling? 

Cf, Jevons, 154. Spencer, Study of Sociology, 306. 

57. In a certain city a piece of grading was 
to be done. It was known and admitted that it 
w^ould cost 15 cents per cubic foot to do it by 
contract and 45 cents per foot to do it by days 
labor. Some favored doing it the latter way and 
replied to the objection of greater cost that there 
would be no loss or injury to the interest of the 
city because the money would be paid to laborers 
resident in the city, and so would stay there. — 
Show the fallacy of this reasoning. 

58. Suppose that, in consequence of great re- 
duction in the cost of transportation between the 
United States and England, the gains of agricul- 
ture in England should greatly decline, what 
would be the successive stages of effect, and what 
the ultimate effect on the wealth of England, and 
why ? (M. 38.) What would be the effect in the 
United States? 



ELEMENTARY PRINCIPLES. 21 

59. What is the value of the obelisk in the 
Central Park? Its first cost to its modern owner 
was o. It cost $100,000 to move it and set it up. 

Jevons, Theory, 159. 



60. A one dollar bank note is in circulation, 
which is a counterfeit, but no one has detected it. 
What is its value ? 

The promoters of a stock company, by puffing- 
it in the newspapers, have run the stock up to 
150. What is the value of it? 

A false bottom was put into an elevator bin so 
that it held 50 bushels when it was supposed to 
hold 10,000. What was the effect on the market 
price of wheat ? What was the value of wheat? 

A piece of cloth was sold for all wool for $1.00 
a yard. It contained 10 per cent, cotton. What 
was its value ? 

A grocer tampered with his scales so that he 

sold 15 ounces for a pound. He charged " 10 cts. 

a pound" for sugar. What was the value of 
luga 



d1. ^ \ piece of land was owned by 15 persons. 
Desirmg |-q divide without selling it, they em- 

ployed th ^ree real estate experts to divide it into 
15 parts wnic ^ • ,h should be of equal value. This 
was done, i j^g next year the tax assessors as- 



22 ECONOMIC PROBLEMS. 

sessed the 15 shares at amounts varying from 
$900 to $2,850. 

What light does this incident throw on value? 



62. In 1870 a house was built which cost 
$100,000. In 1876 it was appraised in an estate 
at $75,000 because that was judged to be what it 
would sell for. In 1880 it was sold for $150,000. 
There were those who claimed in 1876 that it 
should be appraised at what it cost in 1870, or at 
what it would sell for in 1880 so far as they could 
then foresee that. What do you say ? 

63. What causes determine the market value 
of oysters ? 

Cairnes. Principles, 141-146. 

64. ^' Suppose a considerable rise in the price 
of wool to be foreseen, how should farmers ex- 
pect the prices of mutton, beef and hides, respec- 
tively to be affected, and why ?" (M. 868.^ 



65. The Dutch East India Co. used to 
part of the spice crop in order to er' destrc 

profits. Was there a fallacy in the prt 
(M. 547.) 

Adam Smith, II., loi. 



ihance i 
oceedinp 



III. 

POPULATION. 

QQ, Population increases up to the limit of 
the sustaining power of the land at a given stage 
of the arts and under a given standard of living, 
or, mortality and reproduction are equal at the 
limit, on a given stage of the arts, and with a 
given standard of living. — Explain and prove this 
law. 

Spencer, Biology, II., 479. Cairnes, Logical Method, 149-181. 
Roscher, II,, 273-336. Mill, 96-100. 

Fawcett, Pauperism, Chap. III. 

67. What is over-population ? What is under- 
population ? British India has 200 to the square 
mile; Belgium, 469; Rhode Island, 254. Which 
comes nearer to over-population and which to 
under-population .? 

Roscher, 11. , 337-341- 

68. How is the ratio Land : Population affec- 
ted by advance in the arts and higher standard 
of living ? 

Adam Smith, I., 262. 

23 



24 ECONOMIC PROBLEMS. 

69. The law of population and the law of the 
diminishing return show that, other things being 
constant, the human race, in the process of time, 
must advance towards misery, pestilence, famine 
and war. State in detail what " the other things" 
are? Are they constant? If they vary, what 
makes them do so? Define civilization from this 
point of view. Show what produces civilization ; 
what it consists of; what its effects are. Do any 
of your facts or deductions bring out " excep- 
tions" to the laws of population and the diminish- 
ing return, or prove those laws untrue ? 

Princeton Review, November, 1881, p. 303. 



70. What is the importance for land rent, 
wages, rate of interest, and so for the status of 
the population, of the ratio Land : Population ? 
What is the limit of that ratio? 



71. Make a complete catalogue of food-plants 
and discuss their comparative economic value. 



IV. 

LAND AND RENT. 

72. Discuss the following- definitions of rent : 
''Rent is that portion of the produce of the 
earth which is paid to the landlord for the use of 
the original and indestructible powers of the 
soil." 

Rent is the price paid for the use of an appro- 
priated natural monopoly. 

Ricardo, 34. Walker, 203. McCulloch's Adam Smith, 444. 
Adam Smith, I., 151, Rogers's note. 



73. State the law of the diminishing return. 
Mention as many things as you can to which it 
applies. Why do we find our population scat- 
tered sparsely over our whole territory and not 
concentrated on the Atlantic coast ? Why is 
American agriculture slovenly? Why have our 
agricultural colleges obtained few students of the 
science of agriculture? Why is forestry neg- 
lected in the United States? Why are we not a 
pains taking people? Why are we not frugal? 

Marshall, 21-26, Walker, Land, 45-6. 

25 



26 ECONOMIC PROBLEMS. 

74. If the land of a certain district consti- 
tuting an economic unit (i. e. such that, with 
existing- means of transportation, no staples of 
food could profitably be brought into it) were all 
of a uniform quality, would none of it bear rent? 

Adam Smith, L, 151-169, with Rogers's notes. 



75. A court has been established in Ireland to 
adjust rents between landlord and tenant. Is 
this the same thing as fixing wages or prices by 
some public authority? 

Cairnes, Essays, 202-231. 

76. It is argued that the system of "judicial 
rents" will produce two sets of landlords instead 
of one. What is the argument? Is it sound? 
It is argued that fifteen years hence another 
equally arbitrary interference with contract will 
be necessary. What is the ground of that argu- 
ment ? 



'jj. Can a class of peasant proprietors be 
brought into existence by any legislative ma- 
chinery? 

78. What are the social and economic objec- 
tions to the French system for the inheritance of 



LAND AND RENT. 2/ 

land ? What are the objections to the English 
custom of settlements? 

Mill, 540. Edinburgh Review, XL., 350. 

Nation, XV., 218 ; XX., 312. 

Probyn, 122-126; 184-212, cf. 108 ; 291-312. 

Brodrick, 129-151. Walker, Land, 212 fg. Letourneau, 440. 



79. Discuss historically and logically this the- 
sis : The tenure of land of the tiller of the soil is 
always most fixed where personal independence 
is lowest, and, the more liberty and individualism 
are developed, the more precarious is the tenure 
of land. — At what point does fixity of tenure 
turn from the bondage of the villain to the bless- 
ing of the free man ? 

Cunningham, 54, 97, iii, 197-199. Seebohm, 176-178. 

80. Do you know of any place where the 
" margin of cultivation" or the *' Ricardian acre" 
can be seen? Where would you look for it? 
Does it contravene the Ricardian law of rent to 
show that the *' margin of cultivation" for Eng- 
land is in the United States? 

81. "Few Irish farms have been able to fur- 
nish the family of the actual cultivator with a 
comfortable subsistence, and leave something 
over to be contributed to the support of another 
family in a certain ease. In England, owing to a 



28 ECONOMIC PROBLEMS. 

greater abundance of capital, and the existence 
of manufactures, the landlord has been compelled 
to put up with a smaller share, because the far- 
mer's standard of living was higher, and his tra- 
ditions of comfort and respectability so strong, 
that no landlord could compel him to lower them 
in order to pay a greater rent." 



82. Definition of a fair rent: ''A rent which 
might be fairly paid, and yet permit a tenant not 
deficient in those qualities of industry and provi- 
dence which are expected in any walk of life to 
live and thrive." 



83. Is there any rent on a fishery, or a quarry ? 
Is there any rent on a water power? Is stump- 
acre a kind of rent ? Is there anv rent on a mine ? 
Note Rogers's comment (Adam Smith, I., 177), 
and test iiis doctrine by the facts of the coal 
trade in the United States. 

Adam Smith. I., 171-185. Mill, 288. 



84. If one man owned New York harbor 
could he obtain rent for it? How great would 
the rent be? What now becomes of what he 
would get ? 



LAND AND RENT. 29 

85. " How are pasture rents, shooting rents, 
and ground rents of dwellings determined re- 
spectively?" (M. 643.) 



86. A picture by a great artist and an acre of 
land sold in 1825 for the same price. In 1875 the 
same picture and the same acre changed hands 
again for ten times as much each. Is there any 
reason why the state should sequestrate all the 
increased value {" unearned increment") in one 
case and not in the other? (M. 725.) 



87. It is said that a publisher pays Mr. Tenny- 
son ;^4,ooo per annum for the exclusive right to 
publish everything written by Mr. T. Is there 
here anything analogous to rent ? If any analogy, 
how far imperfect? 



88. A manager pays a prima donna so much 
for each evening's performance. How far is 
/ there here any analogy to rent? 



89. What are latifundia ? Where can we see 
latifundia to-day, or the nearest resemblance to 
them ? 

Letourneau, 424. 



30 ECONOMIC PROBLEMS. 

90. Discuss the proposition that the United 
States shall sell no more land without reserving 
the right to demand in future years the unearned 
increment. Hitherto the popular land policy in 
the United States has been that the land should 
be given away freely, or at a nominal price, to 
actual settlers. Has this been a mistake? What 
is the fact about the tenure of land in the theory 
of American law as compared with the same in 
the theory of English law ? 

Sumner, Jackson, 184-191. 



91. Under what head would you classify the 
income of a patentee or an author ; wages, profits, 
or rent? (M. 23.) 



92. Write an essay on Village Communities. 

Maine, Village Communities; De Lavelaye, Primitive Property; 
Seebohm, the English Village Community; Wallace, Russia. 



V. 

WAGES. 

93. Mention as many different ways as you 
know of, in which labor has received, or does 
receive, remuneration for its share in production. 

94. Obviously it is necessary, in order to un- 
derstand the operation of the industrial system, 
to trace the steps of one action and reaction with 
care and detail. But production, exchange, dis- 
tribution, and consumption, production, exchange, 
etc., follow each other in a never ending series. 
They in fact overlap at consumption and produc- 
tion, as when the laborer, his energies revived by 
sleep and breakfast, takes up his spade and again 
tills the ground. It is in distribution, however, 
that the replacement of the capital takes place, 
and we must begin to study a complete reaction 
either with consumption or production. It really 
is immaterial, save that our point of cessation 
must correspond with our point of beginning. If 
we follow through one reaction, we shall find 
that it will cover the consumption, transmutation, 
and replacement of the capital and a distribution 



32 ECONOMIC PROBLEMS. 

and adjustment of it to begin a new enterprise. — 
Criticise. 



95. Wages are the remuneration of labor. 
Wages are the sum paid per unit of time by 

the employer to the employee, in return for which 
the employee contracts to employ his productive 
energy during a specified time in such manner as 
the employer may direct. 
Criticise these definitions. 

Cf. Adam Smith, I., 67, 69. 

96. Describe in detail the contract or com- 
petitive wages system as a part of the modern 
industrial system, and show what the relations of 
employer and employee and their mutual rights 
and duties are in it. Who constitute the wages 
class ? Is there any distinctly differentiated wages 
class in the United States? Under what circum- 
stances is such a class distinctly differentiated ? 

Walker, Pol. Econ., 379. 

Stirling in Grant's Recess Studies, 309-333. 

Jenkin, ibid., 171-187. 

97. Cairnes argues that we cannot apply the 
law of supply and demand to labor, because the 
supply of labor is produced by biological forces 
and not as commodities are produced. — What is 
the fallacy of this argument? 

Cairnes, Principles, 152-3. 



WAGES. 33 

98. If a change takes place in the supply of 
labor, will a proportionate change take place in 
wages? (Cf. question 33.) 

Rogers, Prices, I., 265, 275. 

99. An author who defines wages as the share 
of labor in the product, writes: "The industrial 
conditions were more favorable to the payment 
of wages in the United States, while in England 
the financial conditions were more favorable.'* 
Does he violate his definition ? What is the force 
of the antithesis in the italicized words? 

100. Mill (p. 145 and again p. 207, end of 
chap. X.) speaks of the laborers as one of the 
classes amongst whom \\\q product \'s> divided. At 
the beginning of chap. XI. and afterwards, he 
says that wages are paid out of capital. Is there 
an inconsistency here? If so, what is the cause 
of it, and how is it to be solved? Does he use 
two different definitions of ** wages " ? 

Cf. also pp. 430-439. 

Princeton Review, November, 1882, p. 251. 

101. Sidgwick (p. 318), commenting on the 
confusion between product and capital, noticed in 
the last question, says : " This confusion seems to 
be best avoided by considering the assistance to 
production rendered by labor — whatever form it 



34 ECONOMIC PROBLEMS. 

ma}^ take — as constituting the real capital of the 
employer who purchases it ; and the commodities 
that continually pass into the consumption of the 
laborers as their share of the produce." — Criticise 
this proposition. Note that '' assistance " is said 
to be capital, and the assistance of the employee 
to be the capital of the employer. 

102. Sidgwick says agam (same page) : " The 
employer purchases the result of a week's labor, 
which thereby becomes a part of his capital ; and 
may be conceived, if we omit for simplicity's sake 
the medium of exchange, to give the laborer in 
return some of the finished product of his indus- 
try." — ^Criticise this view. 

103. ''As the employer generally makes a 
profit, the payment of wages is, so far as he is 
concerned, but the return to the laborer of a 
portion of the capital he has received from the 
labor: so far as the employee is concerned, it is 
but the receipt of a portion of the capital his labor 
has previously produced." How does this doc- 
trine differ from that in the last question? 

10-4. It is held that the laborer is the residual 
claimant of the product of industry after rent, 
profits, and wages of superintendence have been 
paid out of it. — Criticise this doctrine. How, 



WAGES. 35 

under this doctrine or that of the last three 
questions, would 3^ou account for the great ad- 
vance in wages and other remuneration of labor 
after the great Plague of 1348 ? 

Walker, Pol. Econ., 265. Adam Smith, I., 109, Rogers's note, 
Cunningham, 188-195. Rogers, Prices, I., 265. 

105. Sidgwick says (p. 322) : ''What remains 
alter subtracting the aggregate price paid for the 
use of capital (including land) is obviously the 
share of labor in the aggregate." — Criticise that 
doctrine. How would this and the doctrine of 
the last question differ from the old doctrine that 
wages and profits are the leavings of each other? 

106. Competitive or contract wages and prof- 
its are in no sense the leavings of each other. 
They are not parts of the same whole. The 
wages come out of capital. Hence one who has 
no capital of his own, or borrowed, can not 
become an employer, however great a chance of 
profit he may see. The profits come out of the 
product. The two (capital and product) stand, 
one before and the other after the transmutation 
of capital which occurs in every period of pro- 
duction, and they are as distinct as the plow- 
man's dinner in April and the farmer's sheaf in 
August, or as the tailor's coat which he is wear- 
ing and the employer's coat which the tailor is 



36 ECONOMIC PROBLEMS. 

making-. The complementary parts of capital 
are raw material and fixed capital. The wages 
enter into the product, not as an explicit, but an 
implicit, arithmetical factor. The product con- 
sists of the replacement of the capital, profits, and 
rent. The replacement of the capital consists of 
wages, raw material, and wear of fixed capital. 
Hence we get tv/o equations, letting x = wages 

and7=profits: ;r+j+-3'= capital ; {x'\-y-\ — )+f-{-u= 

product. Capital and product bear no known 
relation to each other, Hence no ratio of x to / 
can possibly be derived, although it is plain that 
an increase of^, other factors remaining constant, 
would be unfavorable to /. — Expand and criticise. 

Mill, 20, 35, 37. Cairnes, Principles, 159-180. 

Walker, Pol. Econ., 380. 



107. VVages do not belong in distribution at 
all. They belong under the head of consumption 
— productive consumption of capital carried for- 
ward and constantly re-applied, from one period 
of production to another, to sustain society and 
increase the power of man over nature. Hence 
the doctrine that wages are paid out of capital is 
alone consistent with any sound knowledge of 
the evolution of industry and the growth of 
society. If we treat economics under two heads, 
statics and dynamics, discarding the old divisions 



WAGES. 37 

as unphilosophical, wages will fall in the depart- 
ment of dynamics. They are the tie which unites 
two parties in the application of capital to pro- 
duction, viz: one who wants to live by the 
increase of his capital and cannot do so without 
productive effort ; the other, who wants to live 
by productive effort but cannot do so, in a highly 
organized society, without capital. Hence the 
two motives unite them in a contract relation 
whose general aim is their common interest, but 
within which their interests are antagonistic. 
Hence nothing can benefit either which (like 
limiting production) is hostile to their common 
interest, and, under free competition, if either of 
them wins a temporary advantage over the other, 
he will have to pay it back again with interest, 
but probably to the net advantage of both. 
Hence their antagonism, if carried out by legiti- 
mate means, is the law of life and growth and 
not an evil at all. Cf. question 41. — Criticise this 
doctrine. 

108. "The capital of the employer is, by no 
means, the real source of the wages of even the 
workmen employed by him. It is only the 
immediate reservoir through which wages arq 
paid out, until the purchasers of the commodities 
produced by that labor make good the advance 
and thereby encourage the undertaker to pur- 



38 ECONOMIC PROBLEMS. 

chase additional labor." — Show the fallacy. Is 
'* reservoir " a valid analogy ? Suppose that the 
product found no purchasers, or was burned up ? 

Roscher, II,, 56. 

109. Macleod, whose fundamental proposition 
is that " credit is capital," argues that wages 
are paid in credit, i. e. that the employer pays 
his laborers with bank notes. These notes " have 
been part of the ' wages-fund ' and have been 
* capital' exactly as if they had been sovereigns." 
'' Hence we see that not only the accumulation 
of past profits is brought into the wages-fund, 
but also the anticipation of future profits. * ^ 
Every future profit has a present value, and that 
present value may be brought into the ' wages- 
fund ' and made * capital ' of."- — Criticise the use 
of credit, capital, and money in this argument. 
Show that on this argument only, if it should be 
admitted, would it be true that wages can come 
out of product. 

Macleod, II., 120-128. 

110. If an industry was generally depressed, 
but one employer was, by exception, making- 
high profits, what rate of wages would he pay ? 
If an industrj^ w^as highly prosperous, but one 
employer was, by exception, making no profits, 
what rate of wages would he pay ? 

Princeton Review, November, 18S2, p, 255. 



WAGES. 39 

111. Is it the same thing to say that wages 
are determined by the supply and demand of 
labor, and that wages are determined by the 
ratio of capital available for wages to laborers 
ready to work ? 

Mill, 207. Princeton Review, November, 1882, p. 259. 

112. What is the effect of an increased de- 
mand for commodities on the wages fund? 

Cairnes, Principles, 194-200. 

113. What is the relation between prices of 
products and wages of the laborers who make 
those products ? 

Mill, 208-211. Cairnes, Principles, 200-210. 

Rogers, Prices, IV., 491. 

114:. What is the fallacy of connecting wages 
by a sliding scale with the price of the product .^^ 

Marshall, 216. 

115. If the intervals at which wages are paid 
are longer than the period of production in any 
industry, are the wages paid out of product, or 
is the employer swindling the employee ? If the 
latter, show how. 



116. Cairnes teaches that the capital is divided, 
at the beginning of the period of production, into 



40 ECONOMIC PROBLEMS. 

fixed capital, raw material, and wages fund. 
Later he argues that, if trades unions could suc- 
ceed in putting up wages, they would reduce 
profits so low as to check accumulation. — Show 
the inconsistency and show where the error lies. 

Princeton Review, November, 1882, p. 252. 

117. What is the effect to be expected on the 
wages of laborers from insurance against acci- 
dent, sickness, or death, (i) if the employers pay 
for it in whole or in part ; (2) if '' the state'* pays 
for it in whole or in part? 

Fawcett, Pol. Econ.. 6th Ed., Chap. XI. 

118. It is said that the gains of the venturer 
(wages of superintendence) are analogous to rent. 
What ground is there for this opinion ? Is the 
venturer the landlord, the farmer, or the land? 

Walker, Pol. Econ., 247-255. Mill, 290. 

119. If the land of Great Britain should be 
confiscated, would the wages of any employments 
be affected ? If so, which ones, and why ? 

120. If trades unions should' establish a rule 
that women should have the same wages as men 
wherever they are employed in similar work, 
would that rule be for the benefit of women or of 
men? 



WAGES. 41 

121. Suppose that working- time should be re- 
duced 20 per cent., what would be the effect on 
real wages, on profits, and on prices? Compare 
scarcity-high-wages with plenty-high-wages. 

Cf. Rogers, Prices, IV., 491. 

122. " The maintenance of a standard of com- 
fort among laborers is like the maintenance of a 
sea wall ; if a section give way all defense is lost. 
Examine how far this is true, and investigate the 
limits of defensible rules that laborers as a body 
may impose on their associates." (M. 409.) 

To what extent have trades union rules aimed 
at or attained the end of maintaining the standard 
of comfort? 

123. Do you think that the protective taxes 
lower the standard of living of American wage 
receivers? 

124. Strikes and trades union rules do not 
have equal chances of success in all trades. 
Their chances are better according as the trade 
is a monopoly on account of physical circum- 
stances, or special training, or skill, and accord- 
ing as the public is annoyed by any interruption 
of the industry. — Prove this. 

Thornton, 340-360. Marshall, 187-198. Price, Chap. VIII. 
Sumner, What Classes Owe, Chap. VI. 



42 ECONOMIC PROBLEMS. 

125. Is there any ground for believing that 
struggles between employers and employees can 
be done away with by arbitration ? Can arbitra- 
tion be employed in the making of a contract or 
is it confined to the interpretation of a contract? 

Marshall, 214-217. 



126. Is it for the advantage of the wages class 
to find some new and cheaper article of diet? 

Is it for the advantage of the wages class that 
the wives and children of men of that class should 
work for wages ? 

Is it a sign of advance in the community when 
we see more boys employed as cash boys, mes- 
sengers, etc. ? 

Adam Smith, I., 76, 168-170. Mill, 242. 

Walker, Pol. Econ., 321. McCulloch's Adam Smith, 467. 



127. What is the effect on wages of having 
part of the population soldiers, pensioners, pau- 
pers and convicts, or an undue proportion of them 
priests, monks and civil servants ? Are not such 
persons withdrawn from competition in the labor 
supply? How does your answer bear on the 
question whether convicts ought to be employed 
or kept idle? 

The farmers of the United States are told that 
it is for their interest to pay protectiv^e taxes to 



WAGES. 43 

support manufactures, because otherwise the 
manufacturing" population would all compete in 
agriculture. What is the fallacy of this argu- 
ment ? Connect your answer to this question 
with the answer to the last ? 

Sumner, Argument, etc., 7. 



128. Discuss briefly the employment of con- 
victs, in its economic aspects ; discriminate the 
cases where they are employed under superin- 
tendents, or on a contract system ; at the market 
price or below; all in one trade, or in a number 
of trades. 

Mill, 240-241. 



129. Can the landowners of Great Britain 
take all the advantage of the natural deposits oi 
coal and metal in that country, and not let 
British wage receivers have a share in the bounty 
of nature to their country ? 

Cairnes, Principles, 54-57. « 



130. What is the effect on wages and profits of 
exporting capital ? 

Can any connection be traced between the 
exportation of capital and the migration of labor ? 

Suppose that English capital builds a railroad 



44 ECONOMIC PROBLEMS. 

in Iowa and an English laborer migrates to Iowa, 
settles on the railroad line, and cultivates land. 
What are the economic effects on all the parties 
interested, and on the wealth of the two coun- 
tries ? 

Adam Smith, II., 216, Rogers's note. 



131. What is ''store-pay?" Show by an analy- 
sis of the transaction why it is very injurious 
to wage receivers. Do the phenomena of store- 
pay throw any light for the economist on con- 
tract wages ? 



132. An American landowner is often also a 
mechanic ; say, for instance, a carpenter. He 
builds a barn for some one and agrees to take his 
pay in a lump sum when the barn is done. 
What is the economic analysis of such a case? 
Does it throw any light on the theory of wages? 



133. How would the economist describe in the 
technical language of his science that which the 
popular dialect describes as " living from hand 
to mouth?" Describe any persons in savage or 
civilized life who so live ? Can any inferences as 
to a sound wages system be drawn from the 
phenomena of living from hand to mouth? 



WAGES. 45 

134. ''A high rate of wages indicates, not a 
high, but a low cost of production for all com- 
modities measured in which the wages are high.'* 
• — Prove this. 

Cairnes, Principles, 382-386. 

135. '' Show how a rise or fall of the average 
rate of wages within a country acts on its external 
trade." (M. 435-) 

Cairnes, Principles, 318-341. 

136. '' In the island of Laputa a law was passed 
compelling each workman to work with his left 
hand tied behind his back, and the law was justi- 
fied on the ground that the demand for labor was 
more than doubled by it. Examine this argu- 
ment." (M. 443.) Would the human race be 
better off on earth if each person had only one 
arm? If a race should be evolved which had 
four arms, would it be doomed to misery and 
extinction ? 

137. Some coal-workers want a diminution of 
the out-put of coal as a means of keeping up their 
wages. How far, if at all, would the means 
accompHsh the end? (M. 444-) Would the hu- 
man race be better off if the richness of the exist- 
ing deposits of coal was reduced ten per cent. ? 



46 ECONOMIC PROBLEMS. 

138. ''The day-laborer, feeling himself more 
of a man than formerly, must oftener wear a 
white laundered shirt, but he cannot pay over 50 
cents for one. The demand of the higher civili- 
zation of the day-laborer must be met, and white 
laundered shirts are supplied at retail for 50 
cents or even for 37 cents. But the wages of the 
women who make them haye been reduced to 8 
cents per shirt." — Show the fallacy. Can a man 
raise his standard of living at the expense of 
others, just because he wants to? Does true rise 
in the standard of living of one lower the wages 
of others ? 



139. In a shoe town a retail shoe-dealer under- 
sells all his competitors 25 cents per pair. He 
" obtains from the manufacturer his lowest price 
for making 100 cases as per sample. He then 
offers to pay so much — a sum less than the manu- 
facturer's estimate — and pay cash. The manufac- 
turer, rather than lose a good cash order, consents 
to make the goods, but not being able to reduce 
the cost of raw materials takes the discount out of 
labor." — Argued that the wages receivers work 
against themselves and each other by buying as 
cheaply as they can. Show the fallacy. 



WAGES. 47 

140. Ricardo said (p. 241) : " In America and 
many other countries, where the food of man is 
easily provided, there is not nearly such great 
temptation to employ machinery as in England, 
where food is high, and costs much labor for its 
production." — Criticise this. What is the fact 
about the " temptation to employ " labor-saving 
machinery in the United States, and what is the. 
reason for it ? 



14:1. Ricardo goes on : " The same cause that 
raises [the wages of] labor, [i. e. greater cost at 
which food is obtained for an increasing popula- 
tion] does not raise the value of machines, and, 
therefore, with every augmentation of capital, a 
greater proportion of it is employed on machin- 
ery."— Is the doctrine here laid down true? Is 
the reason given for it correct ? 

Cairnes, Principles, 174-180. 



142. Define and illustrate industrial copart- 
nership. Whence comes the gain by industrial 
copartnership ? Is the principle capable of indefi- 
nite extension and application? If not, what are 
its limits? What permanent good will the plan 
accomplish, if it is generally employed? Why is. 
it not popular with trades unionists ? 

Thornton, 363-397. 



48 ECONOMIC PROBLEMS. 

14:3, What are the reasons for the gain in 
cooperative stores? Is the principle of such 
stores capable of indefinite expansion and appli- 
cation ? Ifnot, whatis the limit? What would 
result if cooperative stores should entirely dis- 
place private establishments? Will such stores 
produce a permanent improvement? If so, what 
w^il.l it be ? 

Thornton, 397-418 



14:4:. Cooperation in production and distribu- 
tion aims to reduce or do away with wages of 
superintendence. Would this be a great gain ? 
Is it possible ? 

Holyoake, II., 86. 



145. By aiding and encouraging the accumu- 
lation of capital, cooperative stores operate a kind 
of natural selection on the non-capitalist class, 
selecting out those who have the will and energy 
to better themselves, and helping them on, while 
depressing by just so much more those who are 
shiftless. If the selected women marry only the 
selected men, the separation between these two 
sections of what was once one class widens from 
time to time. — Expand and prove this or refute it. 

Holyoake, II., 193-4. 



WAGES. 49 

14:6. Having in mind your answer to the lavSt 
question, discuss a proposition to provide decent 
lodgings for the miserable, by the interference of 
the municipality in a way involving expense to 
tax payers. 

14:7. Using your answers to the last two ques- 
tions, show which kind of schemes for social aid 
favor the survival of the fittest, and which kind 
favor the survival of the unfittest. Can any 
scheme have any other effect than one of these 
two? 

148. What is the effect of free common schools 
on the comparative wages of skilled and unskilled 
laborers ? 

What is the effect of free schools, including 
high schools, on the salary of female teachers? 

What is the effect of endowed colleges and 
seminaries on the salary of clergymen ? 

What would be the effect of technical and 
industrial schools, maintained by taxation, on the 
wages of artisans ? 

Adam Smith, I., 136-142 ; II., 363, and Rogers's note. 

14:9. " On what does the rate of interest de- 
pend? Is it affected by the amount of the cur- 
rency ? Does the rate of interest affect the price 
of land or stocks ?" (M. 561 ; 565.) 

Mill, 391. Jevons, Theory, 242-245. 



VI. 

CONSUMPTION. 

150. The most important phenomenon in dis- 
tribution, distinguishing distribution from con- 
sumption, is the replacement of +he capital. — 
Expand and explain. 

151. Show the need of investigating con- 
sumption as a department of political economy. 
Show that the proposition : a demand for com- 
modities is not a demand for labor, is a guiding 
principle for a correct study of consumption. 

152. Translate ''A demand for commodities 
is not a demand for labor" into other and less 
technical terms in order to bring out its meaning. 

153. At the end of a certain period of produc- 
tion A, B, C, D, etc., were each a creditor in the 
market for $i ,ooo. A bought and took as his share 
that value in jewelry. B took means of subsist- 
ence and lived in idleness while consuming them. 
C took the same but distributed part amongst 

so 



CONSUMPTION. 51 

servants who served him while he was idle. D 
took the same and gave part to laborers who 
dug an ornamental lake in his grounds. E took 
the same and gave it to laborers who built a rail- 
road which was not needed and could not pay 
working expenses. F took his partly in the 
same, partly in tools and seed, and employed 
laborers to produce a crop of corn. G took his 
in tools, etc., which were wanted by certain 
foreigners to whom he lent them on interest. 
Thus the second period of production passed. 
What was the effect of the course pursued b}^ 
each of these men on the capital of the com- 
munity in the third period of production, and on 
the interest of wage receivers in the second 
perod and afterwards ? 

154. Show that " a demand for commodities is 
not, etc.," traverses the following fallacies: 

(i) That the spendthrift is the benefactor of 
the wage receiver. 

(2) That wages paid measure cost of produc- 
tion. 

(3) That wages are or may be paid out of 
product. 

(4) That trades-union rules benefit wage-re- 
ceivers by *' making work." 

(5) That we *' want work " when we want 
wages. 



52 ECONOMIC PROBLEMS. 

(6) That we need to take measures to "give a 
circulation to money." 

(7) That we want '' an industry" when we want 
goods. 

Adam Smith, I., 343-353. Mill, 53. Marshall, 16. 
Cairnes, Principles, 48-54 ; 194-196 ; 249 ; 254. 

155. How do the things which are luxuries 
vary from time to time ? What definiteness can 
be given to the notion of a luxury ? 

156. Is there any cause for anxiety on ac- 
count of the large amount of "foreign luxuries" 
which are imported into the United States? 

157. Luxurious consumption is selfish and 
unsocial ; productive consumption causes activity 
in a great number and variety of social functions, 
and multiplies the active relations of the con- 
sumer with others. — Criticise this assertion. 

158. Discuss the economic effects on a com- 
munity of an increased expenditure for theatrical 
and similar entertainments. 

159. What judgment is to be passed on "an 
idle rich man" who has no vices, regarding him 
and his behavior solely from the economic stand- 
point ? 



CONSUMPTION. 53 

160. A writer on behalf of the Chinese in 
California estimates their earnings at fifteen mil- 
lion dollars, and then makes this argument to 
show the good they do to that State: ''Of this 
sum, ten per cent, having been deducted for 
savings, thirteen and one-half million dollars will 
pass into general circulation, remaining to enrich 
the State, or passing out of it to pay the debts of 
the general population. It is a stream of wealth 
which enriches the whole region." — Did he prop- 
erly use his facts to prove his case? 

161. ''Luzerne County contains an area of 
1,350 square miles. Until the development of 
the coal trade, the agricultural production of the 
county was in excess of the home consumption. 
Now a different state of affairs exists. The rapid 
increase of population from i860 to 1870, amount- 
ing to 90,000, changed the former order of things, 
and notwithstanding she contains within her lim- 
its some of the most fertile lands in the State, her 
agricultural productions now fall far short of 
the amount necessary for home consumption. 
Nearly one-half of her citizens are non-producers, 
relying upon the coal interest either directly or 
indirectly for their employment or support." 

162. *' If one-third of the present agricultural 
laborers in the (Western) States would become 



54 ECONOMIC PROBLEMS. 

mechanics, miners, etc., and thus consumers of 
their former products, the other two-thirds 
would find no trouble in sending- their dimin- 
ished surplus to the East at reasonable rates, and 
would retain at home the money now sent abroad 
to purchase manufactured articles for their own 
consumption." 

163. State the economic effects to all parties 
concerned, on the island and elsewhere, if a cer- 
tain island, otherwise only sparsely populated, 
should become a sanitary resort. 

16-4. An Irish landlord had an income from 
rent of £x For four years he kept up a certain 
establishment, hiring servants and buying- sup- 
plies wherever he lived, and exchanging his sur- 
plus income entirely for products of France, i. e. 
wine, brandy, silks, laces, ribbons, etc. The first 
year he lived on his estate, the second in Dublin, 
the third in London, and the fourth in Paris. 
Was he an ''absentee" in his second year? What 
was the effect on the wealth of France, England, 
or Ireland, or on the interests of any class in any 
one of these countries, of his changes in his place 
of living ? 

He then changed his policy. He kept up the 
same establishment and hired servants and 
bought supplies wherever he lived, as before. 



CONSUMPTION. 55 

but he saved and made capital of his surplus* 
The first year he lived in Paris and invested his 
savings there. The next year he staid in Paris 
but sent all his savings to Ireland for investment. 
The third year he lived on his estate in Ireland 
and invested all his savings there. The fourth 
year he staid in Ireland, but sent all his savings 
to Paris for investment. What was the effect of 
his new policy in each of the four years on the 
wealth of France and Ireland, and on the inter- 
ests of any class in either ? 

165. A owns some land, some railroad s^ock 
and a share in a factory, in Colorado. Does the 
ownership of either of these pieces of property 
create a duty for him to live in Colorado ; if so, 
of which ? 

Is there any class in Colorado for whose in- 
terest it is that he should live there ? If so, 
what class? 

i66. Would you say that a man might live any- 
where on earth that he chose, undisturbed by the 
fear lest he was doing wrong, or neglecting his 
duty to some of his fellow men, by living in one 
place rather than another? If not, modify the 
statement as you think necessary. 

Would it make any difference with your an- 
swer whether you regarded the feudal relations 



$6 ECONOMIC PROBLEMS. \ 

of landlord and tenant as entirely superseded by 
contract relations, or not? 



167. ''We are glad to see this determination 
among millionaires not to be outdone by one 
another [in building expensive steam yachts]. 
It is a rivalry in which all take the greatest 
interest, and by which all are indirectly bene- 
fited." '' Extravagance, when practiced by mil- 
lionaires is a blessed thing. It causes a freer 
circulation of money, affords the laboring man 
work, feeds women and children, and affects, in 
fact, every industry, no matter how small." 

168. "There was a notion that the money 
appropriated by the river and harbor bill was 
thrown away. Where? Probably ninety per 
cent, w^ent into muscle and labor." 



169. Suppose that, by a change in climate, the 
household consumption of coal in the United 
States should be reduced one-half, what wculd 
be the effect on the wealth of the country ? 

(M.36.) 

170. Suppose that we should succeed in pro- 
ducing a horse-power by electricity at one-half 
the cost of producing the same by steam, what 



- CONSUMPTION. 57 

would be the immediate and what the ultimate 
effect on the wealth of the country? and on par- 
ticular parts of its wealth ? 



171. Describe the state of society which would 
be produced if, as fast as capital was accumulated, 
it was put to productive employment, none of it 
being- consumed luxuriously, and if this was kept 
up for> say, fifty years. 



VII. 
MONEY, CURRENCY AND BANKING. 

172. Money is any commodity which is set 
apart by common consent to serve as a medium 
of exchange. Analyze and justify, or criticise 
and correct this definition. 

173. Is money a measure of value? If so, 
why not include another specification in the defi- 
nition? Define carefully "a measure of value." 
It has been objected that value is a ratio {e.g.^ ^) 
and that we cannot measure a ratio. Is that 
objection valid ? Is money a '' denominator of 
value ?" Does " denominator of value " cover all 
that is correct and - essential in "■ measure of 
value?" 

McCulloch's Adam Smith, 480 fg., and Art. Money in the 
Encyc. Britan. 8th ed. 

17-4. Currency is a collective term for all 
forms of credit instruments by which the use of 
the medium of exchange (money) is dispensed 
with, the instruments of credit serving as records 

and evidence of the rights of the parties until 

58 



MONEY, CURRENCY AND BANKING. 59 

such time as value may be given and received for 
value. Instruments of credit are not a cheap 
kind of money. There is no such thing as cheap 
money. Instruments of credit are not in any 
sense '' substitutes for money," or '' representa- 
tives of money." — Explain and criticise this de- 
finition. Test it in the case of bank-notes, checks, 
promissory notes, book debts. 



175. In barter, one thing is given for another. 
In the money system, one thing is given for 
money and money is given for the other. In the 
credit system, the instruments of credit are not 
''media of exchange." One thing is given as 
half of a barter, and a credit instrument (trans- 
ferable or not) is created as a record and evi- 
dence of the fact, and of a debt. When the other 
thing is given the barter is concluded and the evi- 
dence of debt is cancelled. The utility of credit 
is that it makes money unnecessary. — Criticise 
and explain. Show why, as credit becomes more 
general, the function of money as a measure of 
value becomes more and more important. 

176. Show that, historically, money was first 
invented and used as a measure of value; that, 
in time, when the *' money system " had super- 
seded barter, the function of money as a medium 



6o ECONOMIC PROBLEMS. 

ot exchange came to predominate ; that the func- 
tion of measure of value is now again becoming 
the more important as credit institutions are de- 
veloped. 



177. "Of the money daily used a very small 
percentage is bank-notes. The great bulk is 
checks, drafts and telegrams. The telegraph 
transmits millions upon millions of bank credits 
from Boston to New York, Chicago, London, 
etc., etc., and the reverse, where the telegram is 
the only money used." If, instead of telegraph- 
ing, a man should telephone, would his words be 
money? In the contribution box in church were 
specie, greenbacks and bank-notes. A gentle- 
man put in his card with $i.oo written m the cor- 
ner. If the greenbacks and bank-notes were 
money, was the card money? A play-writer, 
being under personal obligation to an actor sent 
him a card on which was written, " Good for a 
three-act comedy." Was this card money, if 
greenbacks and bank-notes are money? Is any 
definition of money possible if it goes beyond 
the selected commodity ? 



178. How would the question, whether Clear- 
ing House Certificates are money or not, affect 
or be affected by different definitions of money ? 



MONEY, CURRENCY AND BANKING. 6l 

179. A public-house keeper gave a glass of 
beer to a shoemaker and put a chalk-mark on the 
door against the shoemaker's name. After a cer- 
tain time the shoemaker made and delivered to 
the landlord a pair of shoes, thereby cancelling 
the score. Was the chalk-mark money ? Was it 
currency? Suppose that the shoemaker had sold 
the shoes for a bank-note and paid his score with 
the note, would the note be money ? Would it 
be currency? Would the chalk-mark then be 
money? Or currency? Suppose that the land- 
lord gave a receipt for the payment, would that 
be money? Would it be currency? What criti- 
cism do these questions suggest on the definition 
that money is any medium of exchange ? 

180. Show the fallacy of any definition of 
money which puts checks in one category and 
bank-notes in another. Is it a correct criterion 
to say that bank-notes are taken in " final " pay- 
ment, or " without recourse?" 

Walker, Mone3'-, 399. 

181. ''Credit, no doubt, is a comparatively 
fragile and perishable instrument for transferring 
wealth." The ''credit" of a banker who is 
barely solvent, if solvent at all, is said to be part 
of the capital of the bank, " provided we are 
careful to point out that such capital is of fragile 



62 ECONOMIC PROBLEMS. 

nature, liable to sudden destruction in case of a 
panic." — Criticise the notions of credit, capital 
and medium of exchange. Note especially *'fra- 
gile." 

Sidgwick, 129, 239. 

182. Define depreciation and appreciation of 
the currency. What causes may produce either? 
What are the effects of either ? 

More generally, what determines the value of 
the currency ? 

Hertzka, 20-76 ; 192-224. •Chevalier on Gold, 124-137. 

Cairnes, Essays, 53-77- 



183. Define carefully the effect of habit in re- 
gard to money. 

184:. State the law of the distribution of the 
precious metals. 

Walker, Money, Chap. III. 

185. A coin is a piece of metal convenient 
for circulation which is assayed for quality, 
weighed for quantity, and stamped by authority 
as a guarantee of weight and fineness. — Expand 
and explain. Is a coin a highly developed tool? 
Sketch the history of coins. 

Art. Coinage, in Lalor's Cyclopedia. 



MONEY, CURRENCY AND BANKING. 63 

186. Some say that gold and silver are plainly 
indicated by Providence as the materials for 
money ; others say that we use gold for mone}^ 
only because it is the most convenient thing we 
know of for the purpose. Which do you think 
right? 

187. If we work a gold mine, gold comes out.. 
What goes in? On what does it depend whether 
the community gains or loses by the exchange? 

Adam Smith, I., 184; II., 141-4. 
Cairnes, Essays, 43-52. 

188. What facts go to determine the amount 
of money which a country needs? 

Mill, 306. Roscher I., 366-374. Chevalier III., 615-650. 
Walker, Money, 44-76. 



189. May an English cobbler get gold at less 
cost than a California miner ? 

Mill, 366-369. Cairnes, Essays, 103. Roscher, I., 378-380. 

190. In what respect is it an advantage to get 
gold first after it leaves the mines? What was 
the efiTect on Spain of being the first through 
whose hands the gold of America passed in the 
sixteenth century ? 

Adam Smith, I., 199; II., 86-88. Cairnes, Essays, 93-108,. 

Cairnes, Principles, 412-14. 



64 ECONOMIC PROBLEMS. 

191. One nation having conquered another in 
war forced it to pay a great war indemnity. 
Trace the effects on capital, money, prices, 
wages, profits and credit in each country. 

Price, 380-382. 



192. France paid to Germany over a thousand 
million dollars. What were the actual transac- 
tions by which this payment was made ? Anal- 
yze those transactions and show their significance 
in an economic or financial point of view. 

Say, 195. GifFen, Chap. I. 



193. The mint price of gold, .900 fine, at the 
San Francisco and Philadelphia mints is $18,604, 
Why then is gold ever shipped from California to 
New York? (M. 990.) 



194. Give the history of the trade dollar? 
What was the object aimed at by the coin when 
first coined ? Was it a desirable object, and was 
coining the trade dollar a good means of accom- 
plishing it? What is now the difficulty and dan- 
ger connected with the trade dollar? What 
legal ground of obligation exists, if any, why the 
United States should redeem those coins at par 
in gold? 



MONEY, CURRENCY AND BANKING. 65 

195. We read in the money article, ** The 
price for silver bullion in London is 50^ pence 
per ounce. Here the bullion value of the 412^ 
grains silver dollar is $0,849." What is the mar- 
gin for expenses and profits in exporting a silver 
dollar to London, exchange being 4.84 .^^ 

196. What is demonetization? 

197. State the causes of the recent change in 
the relative value of gold and silver. 

See authorities under question 202. Crump, 254-267. 

198. What have been the great changes in the 
relative value of gold and silver during the Chris- 
tian era ? 

Soetbeer, 114, fg. Chevalier, Economic Politique, III., 354-465, 

199. Has the ratio 1:1 5i- for the value of gol-d 
to that of silver any historical or scientific pres- 
tige over any other ratio? Note that at the end 
of the i6th century writers on money regarded 
the relation 1:12 as '' normal ** or as " given by God 
and observed by nature." 

Soetbeer, 127. 

200. The Alternate (or Alternative) or Dou- 
ble Standard consists in a free mint for either 
gold or silver, the gold and silver dollar (or 



66 ECONOMIC PROBLEMS. 

other unit) having a ratio of weight (fineness 
being the same) which is fixed by law. 

Bimetalism is a project for forming a league of 
civilized States to carry out an agreement to 
coin gold and silver at a ratio of 15^ to i, on 
the assumption that fluctuations in the value of 
the metals can in that way be restrained within 
such limits that there will be a concurrent circu- 
lation of the iwo metals, and that the whole 
amount of both metals may be available for 
money. 

Expand and explain these definitions. Note 
especially ''free mint" and the function ascribed 
to law, in the first; also, "project," '* league," 
*' 15^ : I," " assumption," '' such limits," and the 
notion about the desirableness of a large supply 
of money, in the second. 



201. Give the history of the French coinage 
system from 1785 to 1873. Give the history of 
the Latin Union. Did ^rance resume specie 
payments in 1878 on the double standard ? 

Give the history of English coinage since 
1700. What brought about the legislation of 
1816? 

Give the history of coinage in the United 
States since 1790. What were the motives of the 
Bland Silver Act? What have been its effects? 



MONEY,- CURRENCY AND BANKING. 6/ 

Have they been such as the advocates of the act 
expected ? What further effects are to be ex- 
pected ? 

Articles on Coinage in Macleod's Dictionary of Political .Econ- 
omy and Lalor's Cyclopedia. 

Princeton Review, Nov., 1879, p. 551. 

202. The Alternate Standard and Bimetalism 
or Concurrent Circulation stand on a totally 
different plane. The former contains no scien- 
tific absurdity. The question of adopting it is 
purely one of expedienc}^ A concurrent circu- 
lation is a scientific absurdity and a practical 
impossibility. It is scientifically as absurd as 
perpetual motion, or perpetual inertia, because 
it proposes to annul economic force. It is prac- 
tically impossible because the league of States 
would become w^eaker, not stronger, the more 
members it embraced^ — Expand and prove. 

Princeton Review, Nov., 1879. Hertzka, 270-288. 

Walker, Pol. Econ., 406-417 ; Mone}-, 243-271 ; Money and 

Trade, 136-196. Horton, 29-36. Seyd., 584-680. Giffen, 197- 
207 ; 286-310. Sidgwick, 453-4. 

203. ''Imagine two reservoirs of water, each 
subject to independent variations of supply and 
demand. In the absence of any connecting pipe 
the level of the water in each reservoir will be 
subject to its own fluctuations only. But if we 
open a connection, the water in both will assume 



68 ECONOMIC PROBLEMS. j 

a certain mean level, and the effects of any exces- 
sive supply or demand will be distributed over 
the whole area of both reservoirs." Show the 
fallacy of this analogy to prove that a compensa- 
tory action can be established by the mint law 
'^fixing a ratio of value of gold to silver, by which 
compensatory action fluctuations in the value of 
the metals will be neutralized. 

Jevons, Money, 139-40. 

204. Supposing that the bimetalic project could 
be set going, and that the theory on which it is 
based were sound, and that a new supply of gold 
should be won from a new California, what would 
be the effect on the interests of different parties ? 

Hertzka, 277, 

205. Why did the Latin Union close its mints 
against silver in 1874, and following years ? Was 
the so-called ''compensatory action" of the French 
system accomplished at a loss to France or not? 

Hertzka, 268. . • . 

206. If it should be granted that the alterna- 
tive standard favors debtors, and that it is right 
to favor debtors, would that exhaust the effect of 
the alternation ? If not, what would be its wider 
effects on classes and nations ? 

Hertzka, 291-29S. 



MONEY, CURRENCY AND BANKING. 69 

207. Under the alternate standard the standard 
of value would have more numerous fluctuations, 
but less wide fluctuations, than under a single 
standard. — Prove this. Which is the more im- 
portant fact in regard to fluctuations, magnitude 
or frequency ? 



208. Is anyone the richer by obtaining money 
unless by way of gift, theft, or gambling? (M. 
899.) 



209. In 1880 the nickel in a five-cent piece 
was worth three cents. The silver in four quar- 
ters or ten dimes was worth eighty cents^ — ''cents'' 
being hundredths of a gold dollar. A, B, and C 
each paid a five cent fare. A, paid with a nickel 
five-cent piece. B, gave a trade dollar which 
was taken for ninety cents. He received three 
quarters and a dime in return. C, gave a gold 
dollar and received three quarters and two 
dimes. What value in gold did each pay for his 
ride ? 



210. Herbert Spencer argued that the func- 
tion- of coining money would have been better 
performed by private enterprise, Jevons ob- 



70 ECONOMIC PROBLEMS. 

jected that the gain in coining comes from mak- 
ing bad money not good, so that competition 
would run downwards not upwards. Hence, he 
thought that coining was a peculiar industry 
which the State ought to, or must, undertake. 
A third person, commenting on this difference 
of Spencer and Jevons, said that, if governments 
had left coining to individual enterprise, the 
Rothschilds would have given us a universal 
money fifty years ago.— Who was in the right, 
and why ? 

Jevons, Money, 64, 82. Spencer, Social Statics, 438, Cf. Sidg- 
wick, 450-452. 



211. Credit is not a thing but a personal rela- 
tion. Hence it cannot be capital. It transfers 
capital. — Expand and illustrate this statement, or 
refute it, if you think it incorrect. Show the ad- 
vantages of credit and how it aids industry. 



212. A bank is an institution which facilitates 
the borrowing and lending of capital. — Expand 
and explain this definition. Show what false 
notions of a bank it excludes. Does a bank deal 
in credit or debt? Is it an essential function of a 
" bank " to issue notes ? 

Sumner, Tackson, 230, 233-4, 319, 362. 



MONEY, CURRENCY AND BANKING. 



71 



213. Balance Sheet of an English Country 

Bank. 



Liabilities. £ million. 

Deposits, .... 1.74 



Circulation, . 
Acceptances of London 

bankers, 
Capital, 

Guarantee fund, 
Profit to date. 



.05 

.01 
.18 
.04 

.OT 
2.05 



Assets. £ million. 

Cash, in London, and at call, .27 
Government funds, . . .33 
Indian and colon, gov. secur., .44 
Other securities, . . .06 

Discounts, , . .14 

Loans, .... .74 

Bank premises, , . .03 

2.05 



What does this statement show in regard to 
the kind and proportion of the operations of this 
bank, its prosperity, and its ability to withstand 
a financial storm ? 

Gilbart, 98-108 ; 470-488. 



214:. Balance Sheet of a Scotch Bank. 



Liabilities, 
Deposits, 
Circulation, 
Fourteen day drafts, 
Acceptances, 
Capital, . 
Rest or reserve, . 
Semi-ann. dividend, 
Balance, 



£ million. 

, 10.08 

.60 

.13 

.17 

1. 00 

.75 
.07 
.02 



12.85 



Assets. £ million. 

Cash on hand or in London, 2.08 
Consols and colon, secur., 1.43 
Bk. of Eng. and other stocks, .38 



Discounts, 

Short loans,. 

Secur. against acceptances. 

Bank premises. 

Property paying rent, . 



6.85 
1.58 

.17 
.20 

12.85 



What can you learn from this statement about 
the kind of business which the bank is carrying 



72 



ECONOMIC PROBLEMS. 



on, its prosperity, and its power to stand against 
a financial storm ? 

Gilbart, 489-522. Macleod, Dictionary, Banking in Scotland. 



215. Balance Sheet of a London Joint Stock 

Bank. 

Assess. £ million. 

Cash and in Bk. of Eng., . 2.86 
Money at call and short 

notice, . . . 3.71 
Government securities, . 3.57 
Indian gov. secur., . .75 

Discounts and loans, . 17.15 
Liability of customers for 

acceptances, . . .52 

Liability of customers for 

endorsements, . . .07 
Bank premises, . . .30 



Liabilities. 


j^ million. 


Deposits, 


. 23.09 


Circular notes of, 


.56 


Acceptances, . 


.52 


Endorsements, . 


.07 


Capital, . 


2.80 


Rest, . 


1.64 


Profits, . 


.25 



28.95 



28.95 



Criticise as in 

Gilbart, 462-470. 
Bagehot, 243-266. 



question 214. 

Crump, 23-32. 



216. Weekly Statement of the Bank of 

England. 



Notes issued, 



Issue Department 
£ million. 



38.01 



38.01 



^ million. 
Government debt, . . ii.oi 
Other securities, . 4.73 

Gold coin and bullion, . 22.26 

38.01 



MONEY, CURRENCY AND BANKING. 



73 



Banking Department. 
£ million 



Proprietors' capital, 

Rest 

Public deposits, 

Other deposits, . 

Seven day and other bills, 



14-55 
3.09 
3.51 

25.02 
.22 



£ million. 
Government securities, . 13-67 
Other securities, . 20.13 

Notes 11.90 

Gold and silver coin, . .68 



46.40 
The Old Form. 



46.40 



Liabilities. 
Circulation, 
Public deposits. 
Private deposits, 



£ million. 
. 26.33 

3.51 
. 25.02 



: 54.87 



Assets. 
Securities, 
Coin and bullion, 



£ million. 

. 35-OI 

22.95 



57.96 



Balance £ 3.09 mill, as in the Rest above. 
Rate of discount, 3 per cent. 

Describe from this statement the organization 
and operation of the bank. How much was the 
*' reserve ?" What was the per centage of reserve 
to cash liabilities? Give the same points as in 
the last three questions. 

Gilbajt, 21-71 ; 254-277. Crump, 268-307. Price, 419-436. 

Bagehot, 160-243. Hankey, 73-124. 

217. What are the peculiarities in the condi- 
tion of the bank in each of the following state- 
ments? 

Issue Department. 
£ mill. 



Notes issued, 



49.2 



Gov. debt, . > 

Other secur., 

Gold coin and bullion, 



£ mill. 
, II.O 

3.9 
. 34-2 

49.2 



74 



ECONOMIC PROBLEMS. 



Banking Department 
£, mill. 



Capital, .... 14.5 

Rest, .... 3.6 

Public deposits, . . 6.5 

Other deposits, . . 28.2 

Seven day and other bills, .3 



£, milL 

Government securities, . 15.2 
Other securities, . . 16.0 

Notes, .... 21.4 
Coin, .... .8 



53-4 
Discount, 2 per cent. 

What was the active circulation? 



53.4 



Issue Department. 
£, mill. 



Notes, 



33-7 



Gov. debt. 

Other secur., 

Gold coin and bullion. 



;i^ mill. 
. ii.o 

3-9 
. 18^ 

33-7 



Banking D 


epartment. 




£ mill. 




£ milL 


Capital 14.5 


Gov. secur.. 


. 11.7 


Rest, ... 3.1 


Other secur., . . 


20.7 


Public deposits, . . 3.9 


Notes, . . . 


. 7.4 


Other deposits, . . 18.4 


Coin, . . , , 


.6 


Seven day and other bills, .4 






40.5 




40.5 


Discount, Q per cent. 




Issue Department. 




£^ mill. 




£ mill. 


Notes, .... 21. 1 


Gov. debt. 


. II.O 




Other secur.. 


3-0 




Gold coin and bullion. 


. 6.6 



21. r 



MONEY, CURRENCY AND BANKING. 



75 



Banking Department. 



£ 


mill. 




£ mill. 


Capital, .... 


14-5 


Gov. secur.. 


. 9.4 


Rest, .... 


3-5 


Other securities, . 


26.1 


Public deposits, 


5-3 


Notes, 


.9 


Other deposits, 


12.9 


Coin, 


.5 


Seven day and other bills. 


.8 








37-0 




37.0 


Discount, ] 


[o per cent. 





Liabilities. 


$ thousand. 


Capital, . 


. 464. 


Surplus, 


203. 


Undivided profits, 


. 53- 


Circulation, 


404. 


Deposits, 


. 419- 


Due banks, 


27. 



218, Statement of a National Bank. 

Resources. % thousand. 

Loans and discounts, . 708 
Over-drafts, 

Bonds to secure circula- 
tion (par value), . . 450, 
Other stocks and bonds, 163 
Due from reserve agents, 105 
" " banks, . . 21 
Banking house, . 32 

Current expenses and taxes, 3 
Checks and cash items, . 4 
Exchanges for Clear. House. 1 1 
Notes of other banks, . 15 
Gold, ... 30 

Silver, .... 
Legal tenders, . . 9 

Redemption fund in U. S. T., 20 



$1,574- $1,574 

Criticise this statement in the same manner as 
in question 2I4. 

H. A. Richardson, National Banks. 



j6 ECONOMIC PROBLEMS. 

219. ''So many convertible bank-notes will 
the public use as it has a positive need for in 
paying with bank-notes and no more." — Expand 
and explain. How does this assertion bear on 
the question whether '' paper is better than 
specie?" 

Price, 418, 

220. Criticise the notion of what a banker 
does which appears in the following : " We have 
to consider that the banker to a great extent 
produces the money he lends, viz : his own obli- 
gations, which so long as his business flourishes, 
he is practically never compelled to redeem ; 
and that he may easily afford to sell the use of 
this commodity at a price materially less than 
the rate of interest on capital generally." A 
banker's rate for commercial bills may be less 
than the rate of interest '* since a comparatively 
low rate of interest on the medium of exchange 
inexpensively produced by the banker himself 
would be sufficient to give him normal profit on 
his banking capital." For *' banker " read coun- 
terfeiter and so test the notion. 

Sidgwick, 262. Price, 444-458. 

221. A banker " may be only just able to pay 
what he owes to others, and yet be, so long as 
his credit lasts, a wealth}^ man. Suppose that 



MONEY, CURRENCY AND BANKING, 7/ 

he owes ^1,000,000 (without interest) [deposits, 
etc.], and has debts of merchants, railway com- 
panies and the government, which together 
could be sold for i^ 1,000,000. If there were a 
run on the bank and he had to suspend payment, 
his wealth would be found equivalent to zero; 
but meanwhile he obtains the interest on £i,~ 
000,000, which will leave him a handsome sur- 
plus after paying the expenses of the. bank. And 
since there is no reason why he shall not con- 
tinue to enjoy this surplus for an indefinite 
period, his business might obviously be sold for 
a considerable price, even though its assets did 
not balance its liabilities, provided that the sale 
were a secret one, so that its credit could be 
maintained." Would such a man add to the 
wealth of the country? We formerly had bank- 
ers of this description in the United States but 
we came to regard them as swindlers. Were we 
wrong? 

Sidgwick, 129. 

222. Define the *' currency principle" and the 
'' banking principle." 

Walker, Money, 422-442; Pol. Ec, 178-180. 

223. How would you calculate the value to a 
national bank of its circulation ? Suppose that a 
bank is formed on 4 per cent, bonds which cost 



jZ ECONOMIC PROBLEMS. 

122 and have 20 years to run, the rate of dis- 
count being 5 per cent., what is the profit on the 
circulation ? 



224:. " Explain the remark of an eminent 
banker: * If a customer asked me to lend him 
10,000 sovereigns, I should answer: Withdraw. 
If he asked me to lend him 10,000 pounds, I 
should answer: Let us discuss the matter.'" 
(M, 1065.) 

225. "■ What would be the effect if all the bank- 
notes in the Banking Department of the Bank of 
England were suddenly destroyed ?" (M. 11 52.) 

226. In a period of depression there is just as 
much currency in the country as ever, but large 
sums lie in banks, and the rate of discount on 
call loans is exceedingly low. Why? (M. 1220.) 

227. What is the money market? What is 
dealt in there ? What more correct designations 
might be used? 

228. What is the difference between stocks 
and bonds ? What are preferred stocks and 
second mortgage bonds ? What are coupon and 
registered bonds? 



MONEY, CURRENCY AND BANKING. 79 

229. It is taught that the rate of interest 
depends on the supply and demand of capital. 
In times of crisis excessive rates of interest are 
paid for the loan of bank notes, even of a sus- 
pended bank. Why? and how is such a fact to 
be reconciled with the doctrine first stated? 

Adam Smith, I., 357.. "Walker, Money, 94-98. 



230. Define carefully legal tender, showing 
what it is and what it is not. Could Congress 
make bits of colored paper circulate by declar- 
ing them " legal tender?" 

Princeton Review, November, 1879, p. 561. 



231. Which is the better kind of paper cur- 
rency, a government issue (greenbacks) or an 
issue guaranteed by the government (national 
bank notes) ? Give reasons in full. 



232. If we had no public debt could we 
have no national banks? or no national currency? 
If greenbacks should be called in, paid, and 
burned, and if the national bank note currency 
should all be surrendered, and if no state banks 
w^ere allowed to issue notes, what would be the 
effect on our interests or our convenience, and 
what should we probably do? 



8o ECONOMIC PROBLEMS. 

233. Apply the theory of value to incon- 
vertible paper currency issued by a government. 



234:. Whenever instruments of credit are 
generally used as the solvents of contracts, and 
as the things which are passed from hand to 
hand instead of money, and in order to avoid the 
use of money, such instruments of credit bear 
upon their face the word " dollar," "■ pound," 
*' franc," etc., by which they refer to coined 
money which has acquired a traditional and 
habitual, but variable purchasing power. What 
is the difference between a bullion note, a con- 
vertible bank note, and an inconvertible treasury 
note, in their relation to the coin whose name 
they bear? 



235. The "fiat money" doctrine is that the 
government stamp gives the value to a coin; 
that the ''dollar" is an ideal unit; and that the 
government can just as well issue a note bearing 
the inscription: "This is one dollar by Act of 
Congress." What effect would it have on this 
theory if at the same time a new name should be 
invented for the " ideal unit of value," say, a 
'' Washington," and the note should read : " This 
is one Washington by Act of Congress?'' Could 



MONEY, CURRENCY AND BANKING. 8 1 

such a note " measure value ?" If not, how or 
why could a greenback do so before 1879? 

Walker, Money, 280-290. 



236. If the United States should issue "fiat 
money" now, how would it be brought into cir- 
culation ? 

Walker, Money, 288-289. 

237. Can you trace any connection or relation 
between paper money inflation and the rise of 
city real estate ? 

Mann, Chap. X. 



238. ''A shrinking volume of money transfers 
property unjustly, and causes a concentration 
and diminution of wealth. It also impairs the 
value of existing property by eliminating from it 
that important element of value conferred upon 
it by the skill, energy and care of the debtors 
from which it is wrested.'' 



239. The people o\ Guernsey wanted a mar- 
ket, but had not money with which to build it. 
The governor issued paper money, receivable 
for taxes and dues to the island government, in 
sufficient amount to pay for the market. In ten 



82 ECONOMIC PROBLEMS. 

years the market earned its cost, which was paid 
into the treasury in the paper money, which was 
then burned, ''and they got a market for nothing — 
only the credit of the island." 

Cf. Jevons, Money, 204. 



240. Describe the Clearing House and define 
the economic advantages of it. 

Jevons, Money, 263-289. Gilbart, Banking, 451-461, 



24:1. Describe the Check Bank. 

Jevons, Money, 290-298. 

Macleod, Economical Philosophy, II., 510-514. 



VIII. 

INTERNATIONAL EXCHANGES. 

242. " Is there any essential difference be- 
tween trade between country and country, and 
trade between county and county, or even be- 
tween man and man ? What is the real nature 
of trade in all cases?" (M. 1227.) 

24:3. " We may often, by trading with for- 
eigners, obtain their commodities at a smaller 
expense of labor and capital than they cost to the 
foreigners themselves." Explain this. 

Mill, 348-352. 

244. Define comparative cost of production 
and show its importance to the doctrine of inter- 
national trade. 

Cairnes, Principles, 307-317. 



245. Jevons argues that England never could 
import coal and carry on her industries in com- 
petition with those from whom she bought the 
coal, the cost of transportation being a constant 



84 ECONOMIC PROBLEMS. 

premium on the transfer of the industry. Do we 
not see coal brought from Pennsylvania, Mary- 
land and Virginia to New England to be used in 
industry ? How does that fact bear on Jevons' 
doctrine? What is the correct inference? 

Jevons, Coal Question, Chap. XIII. 

246. Jevons argues that coal is exported from 
England as a return cargo and is essential to her 
commerce on that account. Why so? Suppose 
that she should use up her coal and try to im- 
port Pennsylvania coal, what obstacle to that 
would be interposed by the same doctrine when 
viewed from this side? 

247. Give a schedule showing the headings 
of the accounts which enter into the international 
exchange. Show from this how fallacious must 
be any inference about the welfare of the country 
ifrom the preponderance of imports or exports of 
merchandize and specie. 

248. Suppose that the English wheat crop 
fails and England imports wheat in great quanti- 
ties from the United States. How would this 
probably affect the price of bills of exchange 
on England, and the price of English products in 
America? 

Mill, 370-374. 



INTERNATIONAL EXCHANGES. 85 

249. *' He hoped that [the three per cent, 
loan] would be taken entirely by our own people, 
so that the country would be saved from the annual* 
drain of a large sum which must otherwise go 
abroad." 



250. The English law ordains that 1869 sov- 
ereigns shall be cut from 40 troy pounds of gold, 
-f|- fine. The French law ordains that 3100 francs 
shall be cut from a kilogram of gold '^\ fine. 
The law of the United States prescribes that 
the dollar unit shall weigh 25.8 grains of gold, 
y\ fine. What is par of the metals between the 
United States and each of the others, and be- 
tween England and France ? 

Seyd., 285-290, 301, 346. 



251. What is the difference between long and 
ort exchan 

Seyd., 427-433. 



short exchange ? 



252. How is it that it is a mere matter of usage 
whether we say that exchange has risen, or that 
it has fallen, when we mean that it has turned in 
favor of importers? 

253. Give a history of the suspension of specie 
payments by France, 1871 — 1878. Show how the 



S6 ECONOMIC PROBLEMS. 

currency was regulated while inconvertible, and 
what currency doctrines were established by that 
experience. 

Bonnet, two Essays on the Payment of the Indemnit}'- and the 
Management of the Currency. Translated. Appleton : 1875. 
Journal des Economists, 15th December, 1874 (Wdlowski). 



254:. Is it a benefit or an injury to the United 
States that a part of the public debt is held in 
Europe ? 

255. We read in the money article, ''Posted 
rates of sterling- exchange were 4.82 and 4.84^. 
Rates for actual business w^ere as follows : Sixty 
days, 4.81 and 4.81^ ; demand 4.83^ @ 4.84; 
cables, 4.8354^ @ 4.85 ; commercial bills were 
4-79/^ @ 4.80." — ^Explain this statement in de- 
tail. The minimum rate of discount at the Bank 
of England was 3 per cent. Perform the arith- 
metical calculation to show why the sixty day 
bills and demand bills differed just as they did. 

Goschen, Chap. IV. 

25 D. American securities are sold in London 
at an arbitrary rating, ^i=$5.oo. Why is this 
arbitrary rating adopted? News was received 
that 1000 shares of stock owned in New York 
had been sold and paid for in London at 120 per 



INTERNATIONAL EXCHANGES. 8/ 

share. Cable transfers were 4.85. Brokerage was 
^ of one per cent, on the par value. What was 
the net cash value in New York of the return for 
the stock? 



257. In 1832 silver was the standard of the 
United States, the silver dollar containing 371.25 
grains pure silver. The sovereign contained 
113.002 grains pure gold. The ratio of value of 
gold to silver was 15.625 : i. The traditional par 
of exchange was $4.44=;^i. What per cent, was 
the true par of the metals of this assumed par? 



258. Show, in a gold-producing country, what 
the relations and interaction of new gold supply, 
prices, relative amount of imports and exports, 
and rate of exchange would be. 



259. Let it be assumed that 5,000 Americans 
go to Europe for the summer, and spend on an 
average $1,000.00 each; that if they did not go 
to Europe they would spend that amount of 
money in American watering-places. State the 
economic effects of this European travel on differ- 
ent classes of the population in Europe and 
America ? 



88 ECONOMIC PROBLEMS. 

260. *' Whenever our gold is shipped to 
Europe, it is noticed that we are spending more 
than we are earning, and whenever a country 
with our boundless and diversified resources 
finds the balance of trade against it, every sensi- 
ble man and woman should understand that it 
means retrenchment or ruin." 

261. "One of the virtues of extending the 
hand of welcome to the Chinese is shown by the 
fact that to-morrow one thousand of these leeches 
leave San Francisco for Hong Kong bearing 
$750,000 which they have made in this country. 
More than 800 of them have, moreover, been 
provided with return certificates, which enables 
them to return and take away more of our 
money." 

262. " In earlier days the leather made [in 
California] was shipped abroad or to the East, 
and some portion of it was returned in manufac- 
tured forms. The consumer had thus to pay in 
the price of his purchases the cost of two or 
more expensive shipments, and of several com- 
missions. It cannot be for his interest to do this, 
nor, for the interest of the cattle raiser, who 
produces hides, for that of the tanner who pre- 
pares them, nor in the broadest sense for the 
interest of the country." 



IX. 

ECONOMIC POLICY: 

Socialism, AdjusUnent of Rights, etc. 

263. What are the characteristics of an in- 
dustrial civilization? How does the tone and 
temper of a people trained under an industrial 
civilization differ from that of a people trained in 
a military or police state? Show that socialism 
is at war with industrial civilization. 

Spencer, Sociology, I., 584-590 and fg. 



264. In a modern free state, should the ques- 
tion be: Why let alone? or: Why not let alone? 

Sumner, What Classes Owe, Chap. VIII. 



265. Prove that state regulation of education, 
factories, food, lodging, etc., is all illusory so 
long a^ the state does not regulate family life, or 
that, if the state is to regulate at all effectively, 
it must regulate the family. 

Letourneau, 401-2. 

89 



go ECONOMIC PROBLEMS. 

266. Try to make a formula to define the limits 
of state interference. 

Adam Smith, II., 306. Woolsey, I., 243-269. 
Humboldt. Mill on Liberty. Baden-Powell, Chap. I 
Spencer, Social Statics, Essays. 
Rogers, Art, Free Trade, 9th ed. Encyc. Britannica. 
Sumner, What Classes Owe, 112-153. 

267. If it could be proved to a laborer that a 
man of his class in the 13th century had better 
and surer food and clothes than he, he would not 
for a moment think of returning to the complete 
status of the 13th century, just on account of 
what disting-uishes the 19th century from the 
13th, viz: personal liberty, independence, and 
civil rights ; but these are the blessings of which 
free competition is the price. — ^.Criticise this 
assertion. 

Cunningham, 387-410. 

268. A certain job being offered for competi- 
tive bids, one man bid much below any others, 
being very anxious to get it, and being willing to 
employ certain means which other contractors 
disliked, but by which he could make important 
savings. When the bids were opened his was 
rejected because, as he was told, he would ruin 
himself. His plea that he knew his own business 
was disregarded. — What light did this case throw 
on competition and laissez-faire? 



OCIALISM 91 

269. The individual's worst troubles come 
from the cases where • the state cannot let him 
alone, because it adopts lines of policy to which 
he must conform. E. g. : If the state issues 
paper money no man can separate himself from- 
those who like paper money, and go his own way 
on his own judgment. The incidental incon- 
veniences of laissez-faire are not to be compared 
with the positive evils endured by a wise min- 
ority forced to yield to a foolish majority. — 
Expand, prove, and collect other instances. 
Show that the philosophical basis of laissez-faire 
is in the fact that we cannot tell, before the 
event, who is wise and who foolish. 



270. Roscher says : " There is what we might 
call a public conscience concerning merit and 
reward, by which a definite relation of the three 
branches of income to one another is declared 
equitable. Every * fair-minded man' feels satis- 
fied when this relation is realized, and this feel- 
ing of satisfaction is one of the principal condi- 
tions precedent to the prosperity of production, 
inasmuch as on it depends the participation of 
all owners of funds and forces." Does this pas- 
sage describe facts ? 

Roscher, II., 166. Walker, Polit. Econ., 281-286. 



92 ECONOMIC PROBLEMS. 

271. If 9- man takes an axe and goes into the 
woods to cut wood, what is a ''just" return for 
his day's labor? Suppose that one man's wood 
lot is half a mile from home and another's five 
miles from home, is there any case here under 
the head of ''justice?" Can we say that a man 
" must" get profits on the capital in the axe and 
wages for his time ? What would be the differ- 
ence in regard to "just" and "must" if another 
man owned the wood-lot, provided the axe, and 
contracted with the first man to go and chop the 
wood ? 



272. Each productive laborer puts a share 
into the combined social productive effort, and 
each gets some share in the total social satisfac- 
tion. The proportion of the effort to the satis- 
faction is determined by supply and demand, 
under the existing conditions of the industrial 
system. There can be no possible conception of 
a "just" return, or of "justice," in this connec- 
tion, except the true ratio of effort to satisfaction 
produced by the free play of supply and demand 
under existing circumstances. — Criticise this 
statement. Does "justice" have anything to 
do with the question whether A and B get as 
favorable a ratio of satisfaction to effort, one as 
the other? Suppose that A were an artisan and 
B a flunkey. 



SOCIALISM. 93 

273. Distinguish between the right to get, 
possess, and enjoy property, and the right to be 
a property-holder. Which is true and which 
false ? What is the fallacy of any notion of natu- 
ral rights? Is there any physical or metaphysi- 
cal good which is gratuitously bestowed on the 
human race? Show that ''equality" never can 
belong to being or having, but only to the condi- 
tions, chances, and burdens which are created by 
the state. 

De Lavelaye, Preface, and 348-353. 

Sumner, What Classes Owe, 13-15 ; 134-136; 163-169. 



274r. What classes emigrate from Europe to 
the United States? What classes emigrate from 
the United States to Europfe? Why are the facts 
as they are ? 



275. Do you think that there is a tendency ot 
enlightened opinion toward the establishment of 
a right in every man born on earth to go to, and 
live on, any part of the earth where he thinks 
that the environment will be most favorable for 
such a man as he is? If not, state what, modifica. 
tion you would want to make in that doctrine of 
right before you would assent to it. 



94 ECONOMIC PROBLEMS. 

276. If a man owns some land, a horse, and a 
plow, is there any difference in the meaning of 
"property" as applied to each of those things? 
If so, what is it? 

277. What are vested rights? What signifi- 
cance have they for the happiness of man and as 
regards the end for which the state exists? Why 
do some of the greatest difficulties and dangers 
of a progressive and liberal state arise from them? 

Mill, 134. 

278. To pull down those who are superior in 
wealth, culture, talent, virtue, or education is to 
act like an army invading a hostile country, 
which should shoot its own advance guard. — 
Expand and prove this, or correct and refute it. 

279. Can any person be held under obliga- 
tion to contribute to the struggle for existence of 
any other person, unless the former be shown to 
be in some way responsible for the latter's exist- 
ence? — If so, who? and on what grounds? 

Mongredien, Wealth, 233. 
Sumner, What Classes Owe. 

280. Is there any human being who, in any 
conceivable circumstances, can rightfully say ; " I 
must live " ? 



SOCIALISM. 95 

281. It is affirmed that the most efficacious 
cause of the accumulation of great properties is 
allowing- women to inherit on an equal footing 
with men. Is that true? If so, what bearing 
does it have on current discussions about ine- 
quality of possessions? Would it be, in other 
respects, desirable to reverse the tendency of 
modern times in regard to the property rights of 
women ? 

Letourneau, 184, 433-4. De Lavelaj^e, 217-220. 

282. A Connecticut farmer declared that he 
could not '* make any money " because he could 
not hire any laborers. He said that they all 
demanded too high wages. A New York mer- 
chant declared that he could not *' make any 
money " because his landlord demanded an ex- 
travagant rent; the landlord declaring that an- 
other tenant was ready to pay the rent demanded. 
A person who had no capital, but who wanted 
to carry on business, complained that he could 
** make no money " because he had to pay such 
high rates of interest for capital which he bor- 
rowed. State the true significance of the facts 
alleged in each case. What is the correct criti- 
cism on these complaints when analyzed and 
generalized^ What should we say of a proposed 
law to provide one with laborers at wages to suit 
him, another with a store at rent to suit him, and 
the third with capital at a rate to suit him ? 



96 ECONOMIC PROBLEMS. 

283. *' State what you believe to be the chief 
economic arguments in favor of the succession of 
relatives to the property left by deceased persons, 
instead of its lapse to the state." (M. 238.) 

Mill, 135. Letourneau, 440. 



284. Distinguish between different kinds of fac- 
tory acts and state their justification. (M. 1386.) 



285. Is there the same justification for indus- 
trial schools (teaching trades) as for common 
schools (giving general culture)? (M. 1390.) 

286. Is compulsory school attendance justi- 
fiable when tax-payers are forced to Drovide 
schools? 



287. '' These wretched people (in the slums of 
London) must live somewhere, and it must be 
near the center, w^here their work lies. It is 
notorious that the Artisans' Dwelling Act has, in 
some respects, made matters worse for them. 
Large spaces have been cleared of fever-breeding 
rookeries to make way for the building of decent 
habitations ; but the rents of these are far beyond 
the means of the abject poor. They are driven 
to huddle more closely together in the few loath- 



SOCIALISM. 97 

some places still left to them, and so Dives makes 
a richer harvest out of their misery, buying up 
property condemned as unfit for habitation, and 
turning it into a gold mine, because the poor 
must have shelter somewhere, even though it be 
the shelter of a living tomb. The State must 
make short work of this iniquitous traffic and 
secure to the poor the rights of citizenship, the 
right to live in something better than fever dens, 
the right to live as something better than the un- 
cleanest of brute beasts. This must be done 
before the Christian missionary can have much 
chance with them." 



288. Would it be expedient for a State to ex- 
pend capital in creating a colony and persuading 
its emigrating citizens to go to that colony, 
rather than to let them go whithersoever their 
interest might lead them ? Would it be for the 
interest of either Germany or the United States 
that German immigrants should take possession 
of one State of this Union and make it a *' Ger- 
man State ?'* 

Roscher, II., 371. Adam Smith, II., 134-225. 



289. An argument for government favor to 
capitalists by not placing the interest on govern- 
ment bonds at the lowest market rate : 



98 ECONOMIC PROBLEMS. 

" If we were dealing- with the money-lenders of 
Europe the question would be entirely different ; 
but we are dealing with our own people ; we are 
■dealing with women, with children, with those 
whose property is in the hands of guardians and 
trustees ; with the farmer who has laid aside tem- 
porarily a little money ; with the merchant who 
has a little balance which he desires to invest in 
a security which shall be not only absolutely safe 
but which he may convert at any moment with- 
out loss. Do we want to stand — if I may use the 
word — ^jewing with this class of people to see 
whether this rate of interest shall be 3}^ or 3^ 
or 3 per cent.? We must remember that what 
the government will save by cheapening the rate 
of interest this class of people of whom I have 
spoken will to a great extent lose." 



290. An American hotel-keeper who failed 
said that " one of the drawbacks with which 
hotel-keepers have to contend is the constant in- 
crease of rent demanded by our landlords just as 
soon as they discover we are making a dollar." 
If the principle of the Irish land act is sound 
should not the legislature appoint a commission 
to examine into the truth of the alleged fact, and, 
if it be found true, should not a court be ap- 
pointed to assess the " fair rent" of a hotel? 



SOCIALISM. 99 

291. On what grounds may railroad land grants 
be justified? 

292. It is objected to patents that they establish 
property in an idea or device, but that no prop- 
erty in an idea or device should be recognized 
because two men, or any number of men, can use 
the same idea or device without interfering with 
each other, or using it up, but that property in 
land or chattels is recognized because two men 
cannot use or enjoy them at the same time. It is 
also objected that patents are given only {or pri- 
ority, not for the invention, and that, within the 
period of the patent, many persons might inde- 
pendently work out the invention, but are de- 
barred from using it, even for themselves, by the 
patent law. — Criticise these arguments. 

293. "A copyright is a patent under another 
name a.^J applied to another class of objects, 
writings instead of inventions." — Is that state- 
ment correct? Distinguish thoroughly between 
copyrights on the one side and patents and tariff 
monopolies on the other. 

Ford, II., 58. 

294r. Why is transportation a matter of so 
much greater importance in the United States 
than in England, France or Germany, and why 



lOO ECONOMIC PROBLEMS. 

are transportation questions so much more diffi- 
cult here ? 

295. It is said that a railroad pool does away 
with competition. Why is that not quite cor- 
rect? 

296. What are income bonds ? What are col- 
lateral trust bonds ? 

297. The trunk lines, by agreement, charge one 
cent per bushel for elevator work at New York, 
Baltimore and Philadelphia. The New York 
railroad commissioners urged that this charge 
should be abolished at New York. The repre- 
sentatives of the railroads replied that to do so 
would put the port of New York at a disadvan- 
tage. At other ports steamships lie alongside of 
the pier on which the elevator is, and there is an 
elevator charge of one cent per bushel. In New 
York the ships will not come to the elevator but 
the grain must be lightered in floating elevators. 
The roads pay lighterage, three-fourths of a cent 
per bushel, and charge elevator charge of one 
cent. If the elevator charge were abolished at 
one place, it would be at all, and that would 
leave New York at a disadvantage. 

Criticise this allegation and inference. 

Report, Hepburn Committee, 22-25, 33~4' 



SOCIALISM. lOI 

298. Wliat is watering stocks? Specify as 
many varieties of it as you can think of. Could 
a house, a newspaper, or a race-horse, be 
" watered " in the same way ? Why do we 
never hear of it? Why should anyone desire to 
water stocks ? 



299. A subscribed three shares in a company 
at par. He received twelve per cent, dividend 
and the stock was quoted at 200. The company 
increased its capital in order to extend its busi- 
ness. It did so by allowing each owner of three 
shares to subscribe for and get one new share for 
$100. A sold his "right" for $75. After the 
increase the stock was quoted at 175. Analyze 
this operation and show its significance for the 
rights and interests of the public or of any par- 
ties concerned. 



300. How would you capitalize a newspaper, a 
lease, a patent right? A company is formed to 
build a railroad. They subscribe for first mort- 
gage six per cent, bonds in sufficient amount to 
build it. When it is done they make a stock 
capital for it. Why do they adopt this method? 
Criticise it. What should be or may be the 
amount of the stock capital ? This stock capital 
is said to be " ail watero" What is meant by 



I02 ECONOMIC PROBLEMS. 

that and is it true? What, if any, property or 
valuable thing is behind that stock? What is 
meant by '' capitalizing the road at all which the 
traffic will bear?" It is said to be a wrong to 
the public to do that. Why ? What do you 
think about it? 



301. It is argued against watering stocks that 
if a railroad doubles its stock it has to raise its 
rates for freight and passengers so as to force the 
public to pay profits on the increased stock. — 
Criticise that argument, taking note of the two 
cases, one where the road is a monopoly and the 
other where it is in full competition with others. 



302. A few able and unscrupulous men com- 
bined and bought, at a low rate, the stock of a 
railroad which was well situated but badly man^ 
aged. They subscribed new capital, put it in 
good order, paid a dividend, and issued a glow- 
ing report. The stock rose to a high figure. 
They then doubled the stock and also issued 
bonds on the road for a large amount. Thej 
paid large dividends on the watered stock and 
the half shares were soon as high as the whole 
ones were before. They then bought up par- 
allel and branch roads at low rates and sold them 
to the former railroad for its bonds. These and 



SOCIALISM. 103 

their stock they then sold. Next they ceased to 
pay dividends and issued a gloomy report. 
Thereupon the stock fell and they bought it 
again. — What had " watering stocks " to do with 
these transactions? What had issuing annual 
reports to do with them? 



303. A patentee found after a few years that 
his patent brought him in $5,000 a year. Nine 
capitalists subscribed $5,000 each to buy of him 
nine-tenths of his right. The ten then subscribed 
$5,000 each and formed a joint stock company to 
develop the patent. It had still ten years to run 
and they expected that it would earn at least an 
average of $25,000 per year for those ten years. 
They put the capital of the company at jt: dollars, 
of which each of the ten took one-tenth at the 
start. What difference did it make to any body 
what the value of .^ was? If you were one of the 
ten, at what value would you want a; put, and 
for what reasons ? 



304. Write a short essay on the postal tele- 
graph. Consider the possibility that telegrams 
might be sent at a uniform rate as letters now 
are. 
Jevons, Social Reform. 



I04 ECONOMIC PROBLEMS. j 

I 

305. Write a short essay on the purchase of all f 
railroads by the federal government. 



306. Write a short essay on the nationalization 
of the land. 

Fawcett, Pol. Econ., 6th ed., Chap. XI. DeLavelaye, 320-1. 



307. Write an essay on *' National Education," 
i. e., on the proposition, in various forms, to have 
the federal government meddle with education. 



X. 

ECONOMIC POLICY: 

Public Finance. 

308. In what circumstances is it possible to 
reduce the interest on the public debt? 

Leroy-Beaulieu, II., 365-376. 

309. Is it possible to pay off a public debt too 
rapidly ? What is the effect of paying it very 
rapidly ? 

Sumner, Jackson, 266-72. 

310. What measures the burden to a people of 
their debt? 

Is it right to put the extraordinary expenses of 
this generation as a burden on the next? On 
what grounds might an argument be made for so 
doing? 

If a nation is young and growing, what will be 
the fact with regard to the burden of the debt 
from decade to decade. How does this fact bear 
upon the policy of heavy taxation now to pay the 
debt of the U. S. speedily? 

Leroy-Beaulieu, II., 308-311 ; 360-363. 

105 



Io6 ECONOMIC PROBLEMSo 

311. What was the experience of England with 
a *' sinking" fund " between 1790 and 1828 ? 

Hamilton, 80-171. Leroy-Beaulieu, II., 306-322. 

Accounts and Papers, 710. 

312. Has the United States ever had similar 
experience ? 

Seybert, 759-774- 

313. What is the arrangement about the sink- 
ing fund of the federal treasury now ? Is the 
sinking fund of any use or necessity aside from 
the contract with the bond-holders? Has it any 
value in fact for them ? 

W. A. Richardson, 82-85. 

314. Show that a sinking fund is not a force 
in itself, and never can do anything towards the 
payment of a debt beyond just the amount of 
saving which is put into it. 

315. What was the fallacy of deductions from 
compound interest which were made the basis of 
sinking fund doctrines a century ago ? 



316. How is the reduction of the English debt 
now accomplished instead of using a sinking fund ? 

Accounts, etc., 720. 



PUBLIC FINANCE. 10/ 

* 

317. What are exchequer bills? What is the 
theory of their use? 

Bagehot, chap. IV. 



318. It is argued by very sound and con- 
servative economists on the continent of Europe 
that it is expedient to connect a drawing of 
prizes with drawings of the public debt for pay- 
ment, because fortune and misfortune enter into 
human life, and constantly affect the managers of 
capital, so that to offer the small fund holder a 
chance of a bit of good fortune is only to give 
him a chance of the same kind. — Criticise this 
argument. 

Leroy-Beaulieu, II., 246-250, 



XL 

ECONOMIC POLICY: 

Taxation, 

319. Define taxation. Show its relations to 
economic science and statecraft. Show what 
importance it has for the welfare of the people. 
Distinguish between arbitrary exactions by irre- 
sponsible officials where public peace and secu- 
rity are not assured ; taxes laid for other pur- 
poses than revenue and having no relation to 
good government ; and strictly economical taxa- 
tion for which the citizen gets peace, order, and 
security. 



320. The discussion of the canon that taxa- 
tion should be equal has been much confused by 
the fact that the disputants sometimes mean 
equal with respect to units of commodity or 
property or income, and sometimes equal with 
respect to the personal circumstances of the 
different individuals taxed. — Expand and explain 
this statement. 

io8 



TAXATION. 



109 



821. Taxes diffuse themselves on the line of 
least resistance. — Expand and prove. 

322. The parties to an exchange share in all 
the burdens and hindrances of the same in the 
direct ratio of their eagerness for the exchange, 
and they share in the profits and advantages of 
the same in the inverse ratio of their eagerness 
for the exchange. This applies to taxes, freights, 
etc. — Prove this proposition. 

Mill, 354-356. 

323. From w^hat sources are the revenues of 
Great Britain obtained nov^ ? From vi^hat sources 
are the revenues of the United States obtained ? 
Make a comparison of the two systems of reve- 
nue. 

Wilson, 109-130. Ford, II., 137-149. 

324. Give the history of financial reform in 
England during the second quarter of this cen- 
tury. 

Wilson, 66-85. Mongredien, Free Trade. 

Martineau, vols. 2, 3 and 4. 
Levi, British Commerce. 

325. What are the main points in the Peel- 
Gladstone system of national finance ? 

Giflfen, Chap. IX. 

Molesworth, England, II., 50-228 ; II., 380,— III., 225. 



no ECONOMIC PROBLEMS. 

326. ''Under what circumstances are taxes on , 
wages transferred to the employer of labor?** I 

(M. 1555.) i 

Adam Smith, IL, 460-463 ; 466-472. Mill, 498-499- 

327. Criticise the Prussian class-tax. 

Leroy-Beaulieu, I., 276-280 ; II., 459-461. 

328. Discuss the arguments for and against a 
legacy and succession tax. 

Adam Smith, IL, 453-4. Mill, 495. Jevons, Coal, 365. 

Leroy-Beaulieu, L, 489-500. Letourneau, 440. 

Sumner, What Classes Owe, 49-50. 

329. Discuss taxes on railroads. 

Sidgwick, 574. Leroy-Beaulieu, I., 542-545. 

330. Discuss an export duty on raw cotton ; 
on wheat. 

Mill, 512-514 ; 515- Sidgwick, 576. 

331. How are we interested in the repeal o^ 
the Brazilian export duty on coffee ? 

332. Coal is essential to England's industry. 
It has been feared that her supply would be ex- 
hausted, and it has been proposed to put an 
export duty on it. Would that be wise ? 

Jevons, Coal Question, 260-261 ; 276-278 ; 354-360. 
Fawcett, Free Trade, 163-4. 



TAXATION. 1 1 r 

333. Write an essay on income tax, including^ 
progressive income tax. 

Leroy-Beaulieu, I., 126-164 ; 422-470. 



334. Write out the notes of a speech which you 
would make, if you were a member of Congress 
this winter, and it was proposed to abolish the 
duty on sugar. 



335. Draw up a budget for the United States 
for the fiscal year 1883-4 on the basis of the 
expenditures of 1882-3, showing what taxes or 
other means of revenue you would employ ta 
provide the required amount. 



XII. 

ECONOMIC POLICY: 

Protectionism. 

336. What is the English system of free 
trade? England levies taxes on some imported 
commodities. How is this fact to be understood 
when she claims to have adopted free trade? 

Sumner, Protection, lo, 

337. Discuss export duties on raw materials 
and fuel, prohibitions on the export of machinery, 
prohibitions on the emigration of laborers, boun- 
ties on the export of finished products, and taxes 
on the imports of commodities, in their relations 
to each other and as parts of a general system. 

Adam Smith, II., 79-99 ; 120-122 ; 226-246, 
Sumner, Protection, 31. 

33 S. Are there are any economic advantages 
in being the first to take a wise or right course? 
Does a merchant or manufacturer argue well 
who says : '* I must cheat or I shall be beaten by 
my rivals who cheat?" Can you illustrate your 
answer by industrial copartnerships or free trade ? 



PROTECTIONISM. II3 

If all men were honest, would honesty have com- 
mercial value ? 

Mongredien, Wealth, 209-212. 



339. Mill says (p. 515): "Those are therefore 
in the right who maintain that taxes on imports 
are partly paid by foreigners ; but they are mis- 
taken when they say it is by the foreign pro- 
ducer." What foreigner is it who pays? and 
what is Mill's argument? 

34:0. It is said that exigencies arise in the 
history of a country when it just needs a little 
help to lift it over a difficulty. Criticise that 
notion. It is said that a protective tariff is just 
what is needed to give the assistance. Assume 
the general notion to be true and criticise the 
special device here proposed. 

Princeton Review, March, i88t, p. 247. 

341. State any proposition which you think 
you can maintain about the relation between high 
or low wages and international competition. 

Sumner, Protection, 22, 42 ; Argument, etc, 10. 

342. In the United States Employers say that 
they need protection because they have to pay 
high wages. Employees say that they want pro- 



114 ECONOMIC PROBLEMS. 

tection so as to make their wages high. In Ger- 
many employees say that they want protection 
because their wages are low. In each case 
*' high " or " low " is taken with reference to 
English wages. Criticise these arguments sepa^ 
rately and in relation to each other. ■jJm 

Sumner, Argument, etc., 8, 9. ^^ 

343. If a man goes into a store and finds a 
piece of cloth such as he wants, does it make any 
difference to him, in any point of view, whether 
the cloth was made across the street or across 
the ocean? What about the cloth alone makes a 
difference to him ? ^ 

34:4. Show the inconsistency between laying 
heavy duties on commerce and dredging out 
harbors; between taxing commerce and subsi- 
dizing ships ; between protecting manufacturing 
and giving land grants to railroads which make 
new land accessible. 

Sumner, Protection, 14; Jackson, 183-4. 

345. Show that, if the protectionists are right 
in laying taxes " to develop our resources," re- 
sources are calamities. Why was the discovery 
of a nickel deposit in the United States a misfor- , 
tune, and why may we regret that a tin mine has 
just been discovered ? 



PROTECTIONISM. II 5 

346. Show the fallacy of the protectionist 
argument that capital, which would otherwise 
be unemployed, is, by protection, drawn into 
use ; that a higher organization of industry is 
brought about which increases production. 

Sumner, Argument, etc., 5. 



347. One country has a good and cheap gov- 
ernment and therefore low taxes. Another coun- 
try has a bad and very expensive government, 
and therefore high taxes. In the first, industry is 
very free and secure. In the second it is tram- 
melled and uncertain. The former therefore 
beats the latter even in its own markets. The 
producers of the latter therefore demand a pro- 
tective tax to *' offset the heavier domestic taxes 
which they have to pay," and 'Ho put them on 
an equality with their rivals." After such tax is 
laid, how many independent evils is the second 
country suffering from? 



348. Show the fallacy : " The money to re- 
place what has been burned [at Chicago] will not 
be sent abroad to enrich foreign manufacturers, 
but, thanks to the wise policy of protection which 
has built up American industry, it will stimulate 
our own manufacturers, set our mills running 



Il6 ECONOMIC PROBLEMS. 

faster, and give employment to thousands of idle 
workmen.'* Was the fire a calamity ? 

Compare this case: When Pittsburg was burn- 
ing in 1877, during a riot, the bystanders refused 
to put out the fire, saying : *' Let her burn, boys I 
It will make work." 

Cairnes, Principles, 253. Sumner, Argument, etc., 8. 



349. A process having been discovered for 
utilizing as fuel great mountains of refuse which 
has hitherto accumulated at the mouth of coal 
mines, the production of steel rails is greatly 
cheapened for the mills which are near the coal 
mines. The competition of these mills closes up 
others less favorably situated. Ts this course ot 
things a calamity to anybody.^ If so, to whom? 
Is it not a misfortune and injustice to the owners 
and laborers in the mills which are closed that 
they are not allowed to set up a tariff wall around 
themselves? — Suppose that the cheapening of 
production had been accomplished in a foreign 
country and was not available here, and then, 
answer the same questions. 



350. *' Upon what a narrow and stupid basis 
do they discuss this American system of industry ! 
They speak of it as if it were protection of the 
mill owners, of the mine owners, of the proprie- 



PROTECTIONISM. 



117 



tors and managers of furnaces and of railroads 
and of ships. Why, of course, they have their 
share in the workings of industry, but the object 
of it all, and the political reason of it all, is that 
we mean to protect our wages from being beaten 
down by the peasantry or the laborers of foreign 
countries, whose dignity, whose manhood, whose 
equality is not preserved." 

351. " It is not enough to show that iron costs 
less in England than it costs here. The question 
is whether iron would not cost far more here, if 
this country, with its enormous demand, were 
dependent upon British manufacturers for iron." 
Discuss the argument that we ought to develop 
industries at home by protection in order not to 
be at the mercy of foreign monopolists*. 



352. '' In the first place, I freely grant that the 
enhanced price of the protected articles repre- 
sents a loss to the consumers, and through them 
to the nation. Against this loss I claim that the 
following gains, where they are gains, should be 
offset : 

First — Any effect that protection may have on 
the *' margin of cultivation." 

Second — Any effect upon the equation of inter- 
national demand. 



Il8 ECONOMIC PROBLEMS. 

Third — Any effect upon the employment of 
classes (women and children) who would not 
have found employment at all in unprotected 
industries. 

Fourth — Any tendency that engaging in the 
protected industries may have in employing 
skilled in the place of common labor. 

Fifth — Any tendency which protection may 
have to lead a nation to save rather than borrow 
the capital its industries call for. 

Sixth — Any influence which protection may 
have upon the state of the arts and the progress 
of invention, both in the nation and in the world 
at large." 

Examine these points. Are there such gains ? 
Can protective taxes win them } 



353, " We must remember that al worker 
may gain more by having his industry protected 
than he will lose by having to pay dearly for 
what he consumes. A system which raises prices 
all round — like that in the U. S. at present — is 
oppressive to consumers, but is most disadvan- 
tageous to those who consume without produc- 
ing anything, and does little, if any, injury to 
those who produce more than they consume." 



- PROTECTIONISM. II9 

354. " Last year, notwithstanding- the high 
duties, we imported of iron and steel, in their 
various forms, a million and a half tons. These 
required, for their production, twenty-eight mil- 
lion days' work, and if made in our country 
would have given steady employment at two 
dollars a day, to one hundred thousand men, for 
eleven months, and have left all the profits here, 
instead of in England." 



355. ** What I hope 1 have done is to show 
that ' capital ' is subject to the law of supply and 
demand. There are many things which affect 
the rate at which accumulation will go on. Its 
ultimate amount, however, is always limited, at 
least as to circulating capital, by the number of 
laborers, and the average amount of capital that 
can be profitably utilized in employing them. 
When accumulations exceed this point one or 
more of three things may occur: i. An increase 
of laborers. 2. Transferring some of them to 
industries in which it takes more capital per 
capita to keep laborers at work; or, ,3, an ac- 
cumulation occurs which depresses profits and 
causes an industrial stagnation. 

Now, when protection diverts labor from agri- 
culture to manufacturing it allows accumulation 
to go on to a point it could not otherwise reach, 



I20 ECONOMIC PROBLEMS. I 

because it transfers labor to employments requir- 
ing more capital. 

The yearly profits on such accumulations are 
a pure gain to the country, and a valid offset . 
against the loss to the consumer, which is the i 
only economic efTect free traders seem able to > 
comprehend." 



356. Criticise the policy of commercial or 
reciprocity treaties. 

Fawcett, Free Trade, Chap. 6. Baden-Powell, 273-278. 

357. The imports of the United States are not 
sufficient to give return cargos for the ships 
which are required to take out the exports. 
Therefore the steamers put in bunks for the 
westward passage and compete with each other 
for emicrrants. Show how the tariff intensifies 
this relation of things. What, then, is the effect 
of the^tariff on the net return for American 
wheat ai74 cotton, on immigration, and therefore 
on the ^^^ji|5;Qs r^f American wage-receivers? 

Cf. Jevoris, Coa". 253 fg. 

358. Describe the comparative results of free 
trade and protection in Victoria and New South 
Wales. 

Baden-Powell, Chap. V. 



1- 



PROTECTIONISM. 121 

359. The Due de Brog-lie wrote a book to 
prove that under free trade the ''less favored 
nations " would lose population and capital 
which would find better employment elsewhere. 
To counteract this he would not adopt the pro- 
tective system, ''nursing father of ignorance, 
laziness and routine," but would adopt freedom 
of commerce " under the reservation of the ex- 
ceptions of which it admits and in the limitations 
which science sets for it, and with liberty to 
extend the limitations and exceptions according 
to national circumstances." — Criticise this propo- 
sition. If the whole population and capital of 
France should move to Greenland, what harm 
would it do to anybody? 



360. '' It might shake the Victorian protec- 
tionist's faith in his own doctrine if he would 
reflect that his most effectual protection against 
the foreigner would be the exhaustion of his own 
gold fields." — Why? Put American for Victo- 
rian, and wheat and cotton fields for f ^'d fields, 
and say if the argument is equall stio^.g. 

Cairnes, Essays, 33-40. Cairnes, Princip'ps, ,13-318. 

361. If a bounty is paid on^^ exports, who pays 
it and who gets it? 

Adam Smith, IL, 79-86. Fawcett, Free Trade, 16-28. 



122 ECONOMIC PROBLEMS. 

362. " With a perfectly free trade it would 
probably be impossible for any country to refrain 
from specializing, while the country that was 
economically strongest would certainly gain at 
the expense of others, as it would have an advan- 
tage in all the bargains of international trade." 
Show the fallacy of this passage. Define '' eco- 
nomically strongest." Note ''all the bargains." 

Cunningham, 410. 



363. " One land would manufacture and an- 
other produce raw materials, so that under a 
combined regime of perfect free trade no nation 
would be likely to consist permanently of a min- 
gled population, of whom a large part w^ere en- 
gaged in tillage and another large part were in 
manfacturing." Show, by a study of the distri- 
bution and differentiation of industry inside the 
United States, that this deduction is erroneous. 

Cunningham, 410. 



364. "A simple case will show how a duty may 
at once protect the native manufacturer ade- 
quately and recoup the country for the expense 
of protecting him. Suppose that a 5 per cent, 
duty is imposed on foreign silks, and that, in con- 
sequence, after a certain interval, half the silks 
consumed are the product of native industry, and 



i 



PROTECTIONISM. 1 23 

that the price of the whole has risen 2Y2 per 
cent. It is obvious that, under these circum- 
stances, the other half which comes from abroad, 
yields the State 5 per cent., while the tax levied 
from the consumers on the whole is only 2^ per 
cent., so that the nation, in the aggregate, is at 
this time losing nothing by protection except the 
cost of collecting the tax, while a loss equivalent 
to the whole tax falls on the foreign producers." 

Show that the above, if generalized, means as 
follows : criticise each of the assumptions, and 
the practicability of the device ; note that it is 
given under the art of political economy : 

(i) If a tax of n per cent, is wanted, but (2) if 
the tax in question may be used up to produce 

onh^ — of revenue, the rest being surrendered to 

m 

protection, and if another tax may be used for 
the deficiency, and (3) if the decrease in the total 
consumption due to advance in price, be left out 
of account, and (4) if we assume that the price 
over the whole outside market may be depressed 

! jy the tax, and (5) if the loss and waste of years 
in bringing about the desired result be disre- 
garded, and (6) if the practical impossibility of 
bringing about the supposed state of things be 

^ overlooked, and (7) if the incidence of the tax, 
variation in price, etc., be measured by the 
price before the tax was laid, without regard 



124 ECONOMIC PROBLEMS. 

to deterioration in quality after the tax is laid, 

then, if a tax of n per cent, causes — th of the 

m 

product to be imported and the price to advance 
— , the foreigner will pay n per cent, on — th 



n 

ot the supply and the consumer will pay — per 

m 

cent, on the whole of it, which will be equal. 

The former will be revenue and the latter can be 

devoted to protection. 

Show that, if all else were sound, this must be 
modified to read: The foreigner would pay part 
of the tax, and the domestic consumer might de- 
vote to protection a sum equal to that part of the 
tax which the foreigner pays. 

Show the fallacy of the whole argument. If 
the foreigner lowers his price for the protected 
market, what is true of the goods which he sends 
into that market and of his profits on them ? 
Does he really pay any of the tax? Show that 

the consumer pays revenue n per cent, on — im- 

ported, and protection n per cent, on the part 

m-— produced at home. 

in 

Sidgwick, 491-492. 



PROTECTIONISM. 12$ 

365. Mr. Ward says that we have now, by our 
science of sociology, attained to the matter and 
method of scientific education. Here, then, he 
thinks, dynamic sociology may begin ; i. e., the 
State may take measures for the application of 
scientific education and thus move on with reg- 
ular and uninterrupted steps to the improvement 
of society. — Criticise this opinion. 



366. Show that the improvement of society 
depends most of all on an advancing standard of 
parenthood. If, then, we could direct our science 
of sociology to the object of highest importance, 
we should endeavor to determine the moral and 
physical elements of a good parent, and to estab- 
lish criteria for measuring and defining those ele- 
ments. If, then, the State were provided by 
science with these criteria, it would have to de- 
termine a standard or limit of good parenthood, 
and take measures to prevent the marriage of any 
persons who were below the standard. 

Prove the steps of this reasoning. Show why 
the point of view is erroneous, and why the con- 
ception of sociology which is here employed is 
chimerical. 




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